FDBusiness.com

Unilever ceo Paul Polman outlined a three-pronged strategy for the firm’s future growth, encompassing innovations, costs and food performance in an analyst call covering first-half results.

Addressing the interim results on July 25, Polman said the global economic climate would stay challenging. “We’re well-placed to respond to these challenges … But there are three areas that are already clear to me where we have to up our game.

“The first one is to continue to step up our pace of innovations … The second one is the need to rebase once more our costs. And the third one is the need to continue to push for this improved performance on food.”

The completion of the first phase of Unilever’s turnaround strategy had quickened product launches, Polman said.

Aligning research and development (R&D) more with product categories would focus R&D, sharpen resource allocation and increase new launches’ speed to market, he added.

The Partner to Win programme of close work with key suppliers was bringing better innovations to market, he said. He expected innovation in liquid margarines and natural spreads to boost business in the second half of 2013, for instance.

New aroma technology

Welcoming Magnum 5 Kisses and Magnum Pink and Black launches earlier this year, Polman added new aroma technology for Lipton Yellow Label Teas had upped growth to double digit levels in existing markets.

In terms of cost cutting, he said streamlining business processes by overhauling IT and enterprise services would “open up opportunities for productivity gains”,  avoiding widespread restructuring.

In food, Unilever’s real challenge was spreads, he said. “And part of this challenge frankly has been self-inflicted.” The aim here was to stay price-competitive, nail the right taste and work on consumer perception of the naturalness of products, he explained.

A ‘Maxing The Mix’ strategy of cutting stock keeping units (SKUs) and concentrating on core brands was paying off, said Polman, helping to boost savoury and dressings sales by 5% in the latest quarter. The programme had started 12–18 months ago, he added.

Unilever had cut a fifth of its global SKUs, “but I think we have a lot more to go”, he said. “I actually am in the camp that if you have less SKUs, you can grow better.

“If you have more SKUs, there are always some SKUs on life support, and you know the National Health Service is becoming pretty expensive.” Savoury product lines had diminished particularly, “because that’s a … more complex category”, he said, although all categories had been rationalised.

Spreads, tea

Despite still struggling, second quarter sales of spreads were picking up and he expected this to continue. The turnaround plan for Unilever’s tea portfolio also remained successful, he added.

“We were pleased to hear Polman speak … of progress in its spreads (c7% of total sales) activities in particular where the management team has been changed and growth is expected to be unlocked by a focus on taste, well-being and price,” stated Shore Capital analyst Clive Black in a note.

“Pricing investment in spreads in the USA has brought share benefits and work is now moving on to Europe.”

Unilever posted underlying value sales growth of 5% in the first six months of 2013 on underlying volumes up 2.6%. The company stated it had raised operating profit margins by 40 basis points to 14%.

Ice cream grew globally, despite cold weather hitting sales in Europe and the US, as forecast.