Unilever's credibility took a fresh knock yesterday when the Anglo-Dutch consumer products group revealed it had failed to kick-start sales of its leading brands such as Dove, Bertolli and Hellmann's.
Its shares dived 6 per cent to 527p after it said underlying sales of its 400 top brands grew by just 1.3 per cent in the first quarter, continuing its run of disappointing trading. Before Unilever abandoned its key sales targets in February, it expected sales of its top brands to grow by up to 6 per cent by the end of this year.
Niall FitzGerald, commenting on his penultimate trading update as co-chairman before he leaves to chair Reuters in September, said he was "not happy" with the performance. His attempts to shake up the group's frozen food, perfumes and Slim-Fast business have all failed to yield results although he insisted "action is being taken to address this".
This year was supposed to be a high point for Unilever as it completes its five-year "Path to Growth" restructuring programme. But rather than celebrating its success in driving its top line, it will instead spend 2004 grappling with the problem areas that have derailed its progress.
Although Unilever's drive to cut costs means it is still on track for double-digit earnings per share growth, analysts yesterday slashed their expectations for sales growth. Lehman Brothers now expects Unilever's leading brands to grow by only 1.9 per cent, instead of 2.8 per cent.
David Lang, at Investec Securities, said: "Clearly they have had much better success in sorting out the supply chain than achieving sustainable growth."
Unilever said the issues at its Slim-Fast arm, which had a dire 2003 as US consumers gave up diet milkshakes in favour of low-carbohydrate regimes, and its prestige fragrance division, which cost it market share, had dragged down its first-quarter sales. It also blamed heightened competition, sparked by "lower than historical market growth".
"Whilst there are clear signs of an improving economic outlook we are also currently seeing an increased level of competitor activity in some key markets," Mr FitzGerald said yesterday. Germany, France and the Netherlands were particularly tough, while the US also remained weak.
Despite Unilever's protestations about difficult trading conditions, its rival Danone achieved underlying sales growth of 5.7 per cent while Nestlé managed 5.1 per cent.
Unilever has bolstered its Slim-Fast business by launching five new low-carbohydrate products, with a further 17 set to hit the shops soon.
The one star in the group's global portfolio was its Latin American arm, which bounced back with underlying sales up 10 per cent, reflecting the progress economies in the region have made since being floored by recent currency devaluations.
Overall, pre-tax profit, including Unilever's share of joint ventures, fell 8 per cent to €931m on sales down 2 per cent at €9.8bn.Reuse content