Unilever backs emerging markets

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The Independent Online
UNILEVER doesn't expect the troubled markets of Asia, Eastern Europe and Latin America to rebound until the second half of 1999, though the world's largest maker of consumer products will continue to invest there, the company's top two executives said.

The company, whose products include Lipton tea, Dove soap, Vaseline, Q-Tips and Sure deodorant, is aiming for markets outside Europe and North America to generate half its revenue in 10 years, up from a third today, co-chairmen Niall FitzGerald and Morris Tabaksblat said.

Unilever's expansion goals come in the face of setbacks among a series of other consumer products companies - ranging from Coca-Cola to Procter & Gamble to Gillette - that have been hurt by recessions in Asia and slowing economies in Latin America.

"The long-term fundamentals remain unaltered" in emerging markets, Mr FitzGerald said last week. "They remain attractive markets."

With some of those markets facing tougher economic problems, however, Unilever plans to adjust its marketing strategy to emphasise cheaper products that could appeal to lower-income consumers. "We're changing our policies and going more for the low-income group of the population, which sadly is larger than it was before," said Mr Tabaksblat.

Unilever, with $49bn (pounds 30bn) in sales last year, has dual headquarters in London and Rotterdam and is operated by two holding companies, Unilever Plc and Unilever NV, which have the same board of directors. The company expects to invest less in emerging markets for the time being because of the markets' weakness.

"They're not growing nearly as fast as they were and surely the capital needs will be smaller than they were in the past," Mr Tabaksblat said.

The company said it is not planning any major restructuring to cut its workforce of 270,000 people in 88 countries. Still, some cutbacks are possible. "We're always looking at our business and looking at ways to keep costs low and competitive," Mr FitzGerald said.

The comments elaborate on those made on 7 August when Unilever said Asia's economic problems will hamper earnings growth after a recession in Indonesia and other nations contributed to stagnant second-quarter profit.

Company officials declined to comment on the outlook for the third-quarter results. In the first half, a 19 per cent surge in sales in the Asia-Pacific region came mainly from price increases in Southeast Asia. The company said it experienced a "slowdown in consumption", with Indonesia and Thailand affected the worst.

About 46 per cent of sales in 1997 came from Europe and 21 per cent from North America.

Unilever, cash-rich following the sale of its speciality chemicals business for $8bn, is considering possible acquisitions in food, home and personal care markets, the executives said.

The company declined to comment on specific companies. "We will not rush to spend that money,'' Mr Tabaksblat said.

Company officials also said no decision has been made on a successor for Mr Tabaksblat, who relinquishes his position about the time of Unilever's annual shareholder meeting in May.

On 8 September, Antony Burgmans, currently business group president for ice-cream and frozen food in Europe, was named to be vice chairman, effective from 1 October.