Unilever’s Brazilian Sure Stings

Image source: Frans Blok / Shutterstock.com

What's going on?

Unilever – maker of Dove toiletries and Ben & Jerry’s ice cream – reported disappointing sales growth for the first half of 2018 on Thursday, but its stock rose by 3%.

What does this mean?

One of the reasons sales didn’t cut the mustard was Brazilian truckers going on strike, meaning some products didn’t get delivered.

The sales growth it did produce, however, mainly came from volumes – i.e. selling more stuff – but it still hasn’t been able to increase its prices by much. Unilever’s customers (like supermarkets) are worried that their customers won’t be able to stomach price rises, and are keeping costs low to stay competitive.

Why should I care?

For markets: Things could be moving in the right direction for Unilever.

Unilever’s going through lots of change right now: it was the target of a $143 billion acquisition attempt from a US competitor, Kraft Heinz, 18 months ago – which prompted a new strategy for the Anglo-Dutch giant. To top it off, its CEO is on his way out of the company, likely causing unrest among shareholders. Although revenues have been disappointing, Unilever’s shares may have been boosted by expectations that its annual targets will still be met (after all, it’s already raised prices in Latin America, and should get those delayed Brazilian deliveries soon).

The bigger picture: Brexit’s impact spreads far and wide.

Unilever’s also proposed to its shareholders that it switches its headquarters from the UK to the Netherlands. The move was initially prompted by the Kraft Heinz acquisition bid, as the Netherlands has tighter laws around takeovers when companies are set up in a specific way. But the company’s since said it’s not going to have this set-up – leading some to question how much Brexit might be impacting business decisions.


Originally posted as part of the Finimize daily email.

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