Unilever sees European growth slowing
Consumer goods giant Unilever Plc/NV expects its strong sales volume growth in Western Europe to slow later in 2010 after pushing up prices as commodity costs start to rise again, its western European chief executive said11/05/2010
Western Europe accounts for 30 percent of Unilever Plc/NV's global sales and the region has turned in four successive quarters of positive underlying volume growth as it looks to reinvigorate these mature and sluggish markets.
"We see a continuation of volume growth in 2010, but this will slow in the latter part of the year, while prices will turn positive towards the back end of the year," Doug Baillie in an interview.
"Our best view is that pricing will be negative in Q2 and Q3 and then turn positive towards the end of the year," he said about his region, which stretches from Norway in the north to Greece in the south and from Ireland eastwards to Austria.
The Lipton tea and Dove soap group has been cutting prices through 2009 to become more competitive after big commodity-cost driven rises in 2008, but sees higher vegetable oil and mineral oil feeding through to its results in the latter half of 2010.
Zimbabwe-born Baillie took over in Europe in May 2008 and has helped to turn a sales volume decline of 2.4 percent in 2008 to flat in 2009 and then push volumes ahead by four percent in the first quarter of 2010 after cutting prices by 3.7 percent.
The group's big northern European businesses, such as in Britain, Germany, France and the Benelux countries, have shown slow growth while southern Europe has been hit by financial crisis, deep recession and high unemployment.
"It will be a difficult year in western Europe. It will be slow steady growth in northern Europe, but southern Europe will be very challenging and very difficult," Baillie said.
Unilever did see positive sales volume growth in the first quarter in Spain and Italy but Greece was very difficult due to the national debt crisis and Portugal was also tough.
Baillie expects the group's West European markets to be flat to one percent higher in 2010, while the eurozone is likely to see the full impact of the debt crisis, Greece in particular.
"We are growing value market share in Western Europe and the aim is to grow ahead of the market to sustain profitable volume growth," Baillie said.
He expects Unilever's purchase last year of Sara Lee's European personal care business for 1.3 bn euros will boost growth and profit margins as the purchase gives it a strong business in skin cleansing and deodorants with its Sanex and Radox brands. The deal is set to close in the third-quarter.
Baillie said one of his aims was to rebalance the west European portfolio towards home and personal care products (HPC) such as Omo detergent and Sunsilk shampoo, as its Knorr soup and Magnum ice cream foods make up 70 percent of European sales compared to a 50-50 global split between food and HPC.
Analysts estimate that the 650m euros annual turnover Sara Lee business is increasing sales at five percent and should help boost overall west European growth as will the proposed sale of its slow-growing Italian frozen foods business, with annual sales of more 450m euros.
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