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Unilever’s Sales Disappoint


Image source: Kate33 / Shutterstock.com

What's going on?

Unilever, which owns brands like Axe, Dove and Magnum ice cream, reported on Thursday that it had disappointing sales in its latest quarter – sending the stock down 5%! It’s the latest sign that big consumer goods companies are struggling.

What does this mean?

Unilever blamed factors beyond its control: like poor weather in Europe hurting its ice cream business (which includes Ben & Jerry’s) and hurricanes hurting sales in its biggest American markets, Texas and Florida. But these aren’t enough to explain why Unilever’s sales came in below expectations in all geographies and why fewer of Unilever’s products grew their market share compared to previous years. Deeper concerns are emerging like growing competition from niche, local brands in various markets.

Why should I care?

For the stock: Unilever will need to adapt to the shifting competitive landscape to improve its outlook.

Unilever is trying to be more agile. For instance, it has put its struggling margarine and spreads business up for sale, and it is giving local teams more freedom to spot trends and innovate. But it is still facing headwinds, including from healthy ice cream Halo Top, which was able to grab market share from Unilever as customers become more health conscious. So the jury is still out on whether Unilever can drive the change that’s needed for it to succeed.

The bigger picture: Sharks are circling the waters…

Activist investors try to spot companies they think could be run more efficiently, and buy stakes in them with the intention of making changes that boost their share prices. This has been happening in Unilever’s space where activist investors have been pressuring consumer goods companies to raise profitability (for example, one high-profile activist has bought a stake in Nestle, which also reported disappointing results on Thursday). Unilever itself was briefly targeted earlier this year by a competitor, Kraft Heinz, which considered trying to take over Unilever and make its operations more efficient (read more here).

Originally posted as part of the Finimize daily email.

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