Growth continued to slow in emerging markets as macro-economic headwinds and the consequences of currency weakness affected consumer demand across a significant number of the emerging countries. The developed markets have not recovered and remain flat to down, with little sign of any improvement so far. In this context Unilever continue to see high levels of competition in many markets and promotional intensity remains high.
Against this background Unilever continued to grow ahead of markets, albeit at a slower rate, and maintained a good balance between volume and price. Emerging markets growth slowed to 5.9% whilst developed markets showed a progressive improvement but still declined in the quarter by (0.3)%. Volume growth was positive in both emerging and developed markets in the quarter but price growth moderated as Unilever lapped prior year increases and took action to ensure that our brands remain competitive in key markets.
Commenting on the results, CEO Paul Polman said: “Underlying sales growth of 4.4% over the first nine months is ahead of our markets. Emerging markets continue to be the main driver of our growth and, despite the current slow-down, they remain a significant growth opportunity which the company is well-placed to capitalise on. We have not yet seen an improvement in market conditions in North America or Europe.
We will continue to accelerate our innovations, backed with competitive support, to build long term growth and value. We expect to report a sequential quarterly improvement in underlying sales growth in the fourth quarter driven by a strong innovation pipeline. We remain focused on achieving another year of profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow.”
Personal Care continued to deliver healthy volume-led growth in the quarter ahead of markets, with a good balance of growth across the sub-categories.
Hair performed well reflecting the strength of the Unilever portfolio of brands. Dove Repair Expertise has now been launched across most of markets. Clear delivered double digit growth despite lapping high prior year comparators and TRESemmé is making good progress in new markets such as India and Indonesia. Sunsilk progressed well thanks to a strong activity plan which included the relaunch of Sunsilk Soft & Smooth with the power of oils. The launch of Toni&Guy into new markets continues with, for example, the recent introduction in the United States retail channel.
Skin cleansing growth was driven by strong performances by Dove and Lifebuoy. Improved Dove NutriumMoisture shower gels have delivered strong results and the Dove Purely Pampering range has been successfully launched in China. Lifebuoy Clini-care 10 performed well with notable strength in South Africa and in India. In skin care, Vaseline body lotion sprays continued their success in North America and are now being extended to the United Kingdom and the Netherlands. The male face launch of Dove Men+Care continued to drive growth and we re-launched Fair & Lovely in India, bringing our “best ever formula” to market with large scale marketing support. Pond’s Flawless Radiance BB cream has been successfully launched in South Africa and Pond’s Men is progressing well in Indonesia.
Deodorants growth reflected another strong performance by Dove in both the male and female ranges. The Rexona ‘Do:More’ campaign is gaining traction in many markets and the new Rexona Men packaging is being rolled out, starting in Latin America and the United Kingdom. Despite increasing competitive intensity, oral business has done well as a result of the ‘Brush Day and Night’ campaign and new product launches such as Pepsodent Germicheck+ in India and Zhong Hua Porcelain White in China. Closeup Diamond Attraction was launched in Brazil.
Foods performance continued to be held back by spreads which, despite showing a progressive improvement, remained negative reflecting weakness in the market and lower pricing in a benign commodity cost environment. Unilever are taking action to enhance the naturalness of products. In the United Kingdom Unilever relaunched Flora with new advertising emphasising the goodness of sunflower whilst in Germany Unilever launched Rama with Butter. In North America Unilever launched ‘Simply Delicious’ clean label variants of Country Crock and I Can’t Believe It’s Not Butter with no artifical colours or preservatives.
Dressings continued to grow, helped by the rollout of the new innovative Hellmann’s squeezy packaging in Brazil. Knorr cooking products continued to grow well, driven by increased penetration of the core range and the success of jelly bouillon and baking bags.
Laundry growth was largely driven by increased volumes and the success of premium formats such as liquids. Unilever are responding to ongoing competitive intensity by re-investing part of cost savings in product performance and in brand support. In France Unilever launched new Skip Small & Mighty, a superior concentrated product with an in-built pre-treatment device and the rollout of Omo with wash boosters, giving outstanding cleaning even in a quick wash, reached South Africa and Indonesia. Radiant has been relaunched with an improved formulation to ‘fight the 5 enemies of whiteness’ and the Comfort aromatherapy range is doing well in South East Asia.
Household care continued to grow as Unilever converted consumers from cheaper but less effective alternatives. Domestos and Cif continue to grow well and the combined launch in Brazil is making good progress. The hand dishwash business continues to grow double digit in emerging markets despite increasing competitive intensity.
Refreshment was disappointing due to a number of unrelated factors. In ice cream, sales benefited from good summer weather in northern Europe but this was offset by weaker performance in southern Europe and particularly in Italy, the biggest European ice cream business. North America was impacted by our decision to withdraw from some low margin products. Despite these headwinds, key innovations such as the launch of Fruttare in North America, the global relaunch of Cornetto and Magnum ‘5 Kisses’ continued to do well.
Tea growth included the launch of Lipton single serve K-cups in the United States and the extension of the Lipton Yellow Label core range in Russia, adding new flavours to the range of better tasting Lipton teas. South Asia continues to see rapid growth with a good performance from the Brooke Bond brand. Sales of Ades soy drinks were impacted by a product recall in Brazil. The underlying issue has been resolved and action is now underway to re-build the growth momentum of the brand.