Unilever sales under target

Unilever has reported disappointing third-quarter sales having lost market share to smaller rivals, dampening hopes that a failed takeover bid by Kraft Heinz would spark a swift improvement in performance.

Underlying sales rose only 2.6%. That was below the 3.9% growth expected by analysts, and the 3% seen in the first half of the year.

The company expressed optimism, however, about the auction of its shrinking margarine and spreads business, which officially started last month.

First-round bids, expected to reach around $8bn (€6.7bn) were due yesterday.

Unilever’s shares fell more than 5%, having risen by a third since Kraft’s failed $143bn takeover bid for the maker of Magnum ice cream and Dove soap in February.

The company blamed poor weather in Europe, hurricanes in the US and earthquakes in Mexico for disrupting sales. However, it also cited the growing threat from local competitors in markets such as US ice cream, where it lost market share to Halo Top, a new low-calorie brand capitalising on growing demand for healthier products and niche names.

That change in consumer tastes, along with the embrace of online shopping, subscription services and home-delivery plans, is eating away at the traditional dominance of multinationals like Unilever, Nestle and Danone.

Swiss rival Nestle reported accelerated third-quarter sales yesterday, but said increased restructuring costs would weigh.

“Life is becoming more difficult for the consumer goods giants,” said Charlie Higgins, fund manager at Hargreaves Lansdown.

“To succeed in the long term Unilever will need to adapt its business model, becoming more agile and responsive to changing trends.” Unilever has made 18 acquisitions since 2015, but is still struggling.

“Our competitiveness has dropped off a little,” chief financial officer Graeme Pitkethly said. The company is only gaining market share in about half of its business, he said, down from about 60% in previous years.

The sale of the margarine and spreads business is progressing well, Pitkethly sa aid.

He said that the company was also looking forward to possible interest from industry players and those looking for exposure to specific markets.

He said Unilever still plans to spin off the business, which makes Flora and Stork margarines, if it cannot get a good price in a sale.

Reuters


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