Unilever beat market expectations to post its first rise in quarterly sales volumes across three global regions for two years, as increased spending on advertising paid off.
The world's second-largest consumer goods maker yesterday said the UK was its star performer in western Europe after robust sales from brands, including Surf washing detergent, Knorr soup and the recently launched Magnum Temptation premium ice cream. In the second quarter to 30 June, Unilever delivered sales volumes up by 1 per cent in western Europe, 1.6 per cent higher in the Americas, and a 3.3 per cent uplift in Asia, Africa and central and eastern Europe. Jim Lawrence, Unilever's chief financial officer, said: "We have not had volume growth in [western] Europe for five quarters."
A key driver of this growth was Unilever increasing its spend on advertising and promotions – as a percentage of sales – for the first time in a year, which accounted for the bulk of a 60 basis points fall in its operating margin.
Paul Polman, the chief executive who took the helm in January, said: "We set ourselves the goal to grow volumes whilst protecting operating margin and cash flow and that has not changed. We are encouraged to see our volumes going up a little bit."
Unilever's underlying sales rose by 4.1 per cent to €10.5bn (£9bn), after it lifted prices by 2.1 per cent and volumes grew by 2 per cent in the second quarter.
In a sign of the changes Mr Polman is introducing, Unilever has kicked off a 30-day action plan to address performance issues, among its top 10 brands, in its 10 biggest countries more quickly, as opposed to more lengthy internal analysis and debate.
For instance, it had already relaunched or introduced new products in South Africa and Brazil, as part of the initiative. Mr Lawrence said: "Paul has brought in an expectation that nothing declines and that is a change. And the 30-day action plan arose from if something is declining let's fix it and go faster."
Mr Polman said the recession had led to fundamental shifts in consumer behaviour, which he did not see changing any time soon. "What we are clearly seeing is that consumers have more frequent shopping trips because they have drawn down their pantry stocks. There is [also] clearly a trend from out of home to in-house [consumption]."
The consumer goods company said that its overall price inflation could be "flat or negative" in the second half of the year. Mr Lawrence said: "We are coming off very big inflation from 2008 and that it rapidly disappearing."
Unilever's quarterly pre-tax profits fell by 12 per cent to €1.2bn, owing to restructuring costs, disposals, pension financing and tax charges. Graham Jones, an analyst at Panmure Gordon, said: "Unilever certainly deserves credit for restoring volume growth more strongly than we had expected."