Ice Cream Woes Hit Unilever Sales--Update
July 25 2019 - 05:11AM
Dow Jones News
By Saabira Chaudhuri
LONDON -- Unilever PLC missed sales forecasts in the first half
of the year as cool weather and intense competition hit ice cream
sales in Europe and North America.
The maker of Hellmann's mayonnaise and Dove soap said Thursday
that underlying sales growth -- a closely watched figure that
strips out currency movements and deals -- rose 3.3% in the six
months to June 30. Analysts had expected growth of 3.5%. Shares
fell 1% in early trading.
Unilever, the world's largest ice cream maker with brands
including Ben & Jerry's, Magnum and Talenti, said growth in the
second quarter was dragged down by 0.5 percentage point because of
the category's weak performance. It blamed cool weather in Europe
and a tough environment in the U.S.
In an interview, Chief Financial Officer Graeme Pitkethly said
the company was struggling to raise prices and bolster profit
margins for its mainstream ice cream brands like Breyer's in the
U.S. where Unilever is seeing intense competition from regional
players like Blue Bunny.
Americans eat more ice cream per capita than anyone else in the
world with most bought in supermarkets for consumption at home.
"It's very much a mainstay of every meal in the U.S.," said Mr.
Pitkethly. "That makes it highly promotional."
In response, the company -- which has over 20% of the U.S. ice
cream market according to Euromonitor -- has been pushing harder to
sell its premium brands in more supermarkets. In 2017, it launched
its own high-protein, low-sugar ice cream under Breyer's to battle
competition from upstart brand Halo Top, which has also taken a
share in recent quarters.
Last year Unilever rolled out Culture Republick in the U.S., a
new low-calorie ice cream brand containing probiotics in flavors
like turmeric chai and cinnamon, and milk and honey. The pint packs
are designed by emerging artists, while a slice of the brand's
profits donated to support art in local communities.
Imbuing brands with a social purpose is a strategy that
Unilever's new Chief Executive Alan Jope hopes to roll out across
its portfolio after insights showed consumers are more likely to
buy, and remain loyal to, such brands.
"All the evidence is brands with strong purpose grow faster,"
said Mr. Pitkethly.
Unilever has been tapping its data scientists and mining social
media for new business ideas, including a direct-to-consumer ice
cream home delivery service. The company discovered a spike in
online ice cream orders in the U.K. on rainy days, which ultimately
led it to launch Ice Cream Now 18 months ago. The service is
available in the U.S. and Europe, said Mr. Pitkethly.
Still, Unilever's ice cream trade overall in Europe was hampered
by wet weather in the second quarter after two years of hot summers
that had buoyed sales.
Average rainfall across 12 European cities was three times
higher in April and May than the prior-year while average hours of
sunshine were down 9% in April from a year earlier and 25% in May,
according to analysts at Jefferies.
All that contributed to an overall decline of 0.7% in underlying
sales growth for developed markets in the first half of the year,
compared with a rise of 6.2% in Unilever's emerging markets.
Underlying sales dropped 0.6% in Europe, further dampened by
price deflation, while in North America they were flat.
Ice cream sales overall rose 2.2% on an organic basis in the
first half of the year, helped by a good first quarter and strong
second-quarter ice cream sales in big emerging markets like Turkey
and India. In Indonesia, after a difficult few years, Unilever's
ice cream sales are improving after the company launched a low-cost
brand to compete with local rivals.
Overall, the Anglo-Dutch company reported a net profit of EUR3
billion ($3.35 billion) for the six months to June 30, compared
with EUR3.03 billion a year earlier. Revenue declined 0.9% to
EUR26.13 billion from EUR26.35 billion driven by the sale of
Unilever's spreads business last year.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
July 25, 2019 04:56 ET (08:56 GMT)
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