Unilever achieved overall growth of 3.4% during the first quarter of 2018, with its Food & Refreshment division logging a 2.7% sales gain on a volume increase of 2.4%. The multinational company reported a strong performance in foodservice channels, and “continued to build presence in emerging markets,” where a 4% growth rate was recorded.
Rival Nestlé, meanwhile, posted 2.8% underlying sales growth in Q1. That reflected a 0.2% boost from higher prices, compared to Unilever’s 0.1% gain.
“We expect chronically weak pricing from both Unilever and Nestlé to play to the market’s fears of weak pricing power, fueled by channel shift, in the face of rising commodity prices,” said Martin Deboo, consumer goods analyst at the Jeffries investment bank in London.
This marks Unilever’s second quarter of volume-led sales growth, after several quarters paced by pricing.
According to Graeme Pitkethly, the company’s chief financial officer, prices have been under pressure in four key markets that make up 25% of sales. In the UK the reason is fierce retail competition; tax policy change was cited in India; weak consumer sentiment was pointed to in Brazil and Indonesia.
Pricing problems notwithstanding, CEO Paul Polman was pleased to report that Unilever’s quarterly dividend rose 8% to €0.3872 per share.
“The first quarter demonstrates another good volume-driven performance across all three divisions [which include Home Care and Beauty & Personal Care],” he said. “We are further improving the quality and speed of our global and local innovation as a result of a more agile, consumer-facing organization. At the same time, we are maintaining strong delivery from our savings programs and expecting to complete the exit from spreads in the middle of the year.”
Ice Cream Innovations
Innovations behind Unilever’s premium ice cream brands contributed to another good start to the year. These included the launch of indulgent Magnum Core and Praliné variants, and the extension of the successful Ben & Jerry’s non-dairy platform from the USA into Europe. Furthermore, Breyers delights’ low-calorie, high-protein variants have now been launched in 11 countries.
Meanwhile, the Anglo-Dutch company continues to modernize its portfolio by responding to consumer needs in fast growing “free-from,” vegan, and health and wellness sectors.
“For the full year, we continue to expect underlying sales growth in the 3%-5% range and an improvement in underlying operating margin and cash flow that keeps us on track for our 2020 goals,” said Polman. “We intend to start a share buy-back program of up to €6 billion in May to return the expected after-tax proceeds from the spreads disposal. We are raising the dividend by 8%, reflecting confidence in our outlook.”
