Unilever Faces Challenges in Turnaround Efforts
Unilever's disappointing Q4 results led to a 3% drop in revenue. However, the company plans to buy back shares and implement strategies to attract customers and improve performance.
Unilever, the consumer goods giant known for top brands like Dove soap and Hellmann's mayonnaise, saw a 3% drop in revenue during the fourth quarter of 2023, resulting in what CEO Hein Schumacher described as "disappointing" results. Despite this setback, Unilever's shares saw an increase on Thursday after the company announced plans to repurchase €1.5 billion worth of its own shares from shareholders.
The decline in revenue can be attributed to a loss of market share in both Europe and North America. To counter this trend, Unilever has chosen to slow down its price hikes in specific divisions such as ice cream and home care. By doing so, the company hopes to attract customers who have turned to cheaper alternatives.
Unilever's shares experienced a 2% decrease in value over the past year but managed to bounce back with a 3% increase following the buyback announcement.
Unsatisfied with the company's competitiveness and overall performance, CEO Hein Schumacher remains committed to turning Unilever around. A turnaround plan was introduced in October, outlining increased investment into marketing for the company's top 30 "power brands," which currently generate 75% of Unilever's revenue.
Despite the disappointing Q4 results, Unilever is determined to regain its market position and improve its overall performance.
Richard Hunter, head of markets at interactive investor, has cautioned that Unilever’s journey toward recovery is expected to be a gradual one, as he points out that the famous saying "elephants don't gallop" fully applies to the consumer goods giant.
Despite reporting higher revenues across all business segments, Unilever saw a decline in its home care and nutrition divisions. This includes popular cleaning products like Cif, Comfort, and Domestos, as well as food brands such as Horlicks, Knorr, and Hellmann’s.
Unilever attributes the decrease in market share to customers shifting towards less expensive own-brand products in Europe and opting for premium alternatives in North America, like the super premium ice cream offerings.
AJ Bell analysts led by Russ Mould have shed light on how Unilever handles the impact of inflation by passing on higher costs to their customers. As a result, some consumers are choosing more affordable options like the supermarket's own-brand ice cream.
The analysts at AJ Bell warn that Unilever will continue to face competition from this trend until interest rates decrease and consumer confidence improves regarding their financial situation.
In an effort to adapt, Unilever has implemented price hikes at a slower rate. In the fourth quarter of 2023, the company increased prices by 2.8%, compared to the significant 13.3% hikes in the same period the previous year. This gradual moderation in price increases has been observed over the course of the past year.