Unilever suffers dip in emerging markets sales growth

Reuters . London | Published: 00:00, Oct 18,2019


A slowdown in India and China put a brake on Unilever’s quarterly sales growth, highlighting the challenges facing chief executive Alan Jope as he tries to boost the consumer goods giant’s business in emerging markets.

Since taking the reins in January, Jope has promised accelerated growth through investment in the likes of Vietnam and Bangladesh, where growing populations and an emerging middle class are driving demand for household products.

Yet two of the Dove soap and Ben & Jerry’s ice cream maker’s biggest emerging markets show signs of slowing growth, with the impact of trade wars hitting domestic consumption in China and irregular monsoons curbing rural spending in India.

‘There have definitely been signs of slowing markets in India and China ... In India, we are going from very high rates of market growth to growth rates in the mid-single digits of growth,’ Unilever finance chief Graeme Pitkethly told Reuters.

In China, sales growth within bricks-and-mortar retailers slowed to 1 per cent from 2 per cent a year earlier, he added. In Argentina, another of its big emerging markets, hyperinflation has kept shoppers away from stores and led to a 4 per cent drop in volumes.

These factors contributed to a sharp slowdown in emerging market sales, which were up 5.1 per cent in the third quarter but a far cry from the 7.4 per cent growth in the previous quarter. Emerging markets contribute 60 per cent to the company’s overall sales.

Growth in developed markets also stalled, falling 0.1 per cent as shoppers shift to more niche products and Europe faces tougher comparisons with last year, when a warm summer boosted ice cream sales in the region.

Overall, underlying sales growth rose to 2.9 per cent in the quarter, missing an average forecast of 3 per cent, according to a company supplied analyst consensus. That lagged rival Nestle, which reported 3.7 per cent sales growth for the period.

Nestle also reported flat growth in China and said it has been unable to raise prices in competitive markets globally.

Still, Unilever reported a 5.8 per cent rise in turnover to 13.3 billion euros, ahead of analyst estimates, helped by acquisitions and a weaker pound.

It also stuck to its full-year target for underlying sales growth in the lower half of a 3 per cent to 5 per cent range and a 20 per cent operating margin in 2020.

Shares in the Anglo-Dutch company were up 1.7 per cent at 46.89 pounds in morning trade and were the third-biggest gainer on the blue-chip FTSE 100 index. The stock is up 11.2 per cent this year.

Nestle shares were down 0.5 per cent at 105.54 Swiss francs.

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