Unilever’s pricing problem
While the FTSE 100 firm has long said its values need not detract from growth, some analysts fear the corporate campaigning may be overshadowing financially important matters.
While overall turnover in the third quarter rose to £11.3bn, up by 4pc compared to the previous year, all of Unilever’s headline sales growth came from price rises rather than volume, according to company filings.
Analysts at Bloomberg say the firm appeared to have suffered a loss of market share across all three of its divisions – food, beauty and home care – “which won’t be easily recouped”.
Another broker warned: “The prices of raw materials, packaging and distribution are soaring. There’s only so much of that extra cost it can add to a tub of Marmite before consumers skip the spread altogether.”
Despite the concerns, Richard Cope of market research firm Mintel, argues that sending household brands into battle to save the planet is now expected by consumers and therefore cannot be ducked. But he warns that for this to be successful, brands must not simply adopt their new values superficially.
“Customers don’t like being talked at, or down to. They don’t want to sacrifice quality but they want brands who they know are taking action on sustainability,” Cope adds.
“They want to not have to worry, to be able to trust companies are committed to these things. And to be fair, that is what Unilever’s strategy is about.”
Certainly, no one could reasonably accuse Unilever of simple opportunistic posturing.
The firm first launched its “sustainable living plan” in 2010 and was talking up green causes long before its investors started to adopt ESG (environmental, social and governance) targets.
Under former boss Paul Polman, who left in 2018, the company launched a new model that sought to reframe sustainability not as an optional extra but something essential to its future.
“We shouldn’t be ashamed of growth,” Polman said in 2010. “But growth at any price is not viable.”
Among a plethora of pledges, Unilever vowed to source more ingredients from sustainable farms, cut use of materials that cannot be recycled and help tackle poor sanitation in developing countries.
Since then, the company has continued to expand its commitments. Jope, Polman’s successor, has championed the causes with similar fervour and extended the requirement for “purpose” to each of its individual brands.
In 2019, he warned that even top sellers such as Marmite and Pot Noodle could be sold off if they didn’t find a purpose.
