Unilever hit by stiff competition in both Asia and Europe
maker of some of the world's leading cosmetics and toiletry brands,
to cut back its earnings outlook for 2004 with a view to changing
it five-year sales targets.
Unilever, which owns brands such as Dove, Lux, Ponds and Signal, together with a number of leading food, beverage and detergents brands, said that on top of the stiff competition some of its primary markets had also been hit by bad weather in Europe. The glum outlook has led the company to cut its earnings forecast to under five per cent.
In Western Europe the personal care and household division had been badly hit by falling sales, which was compounded by the fact that hair care product sales were also hit in the Asian region. Elsewhere the poor weather in Europe had particularly impacted sales of Lipton tea and ice cream.
Unilever said its approach to the declining forecast would be bullish, stating that it intended to spend its way out of the slump with heavy expenditure on marketing to spur its top brands. Part of the company's five year plan is an emphasis on its key brands, which the it sees as being core to future sales. In particular the Dove brand of soaps, moisturisers and hair care products have formed the focus for investments on marketing and advertising activities in recent months.
However, analysts say that, contrarty to Unilver's claims that it has invested heavily in its core brands, the company has in fact cut back on advertising expenses in an effort to increase its profit margin, a strategy that is having a clear affect on the performance of its leading brands.
In view of the poor outlook, the Anglo-Dutch company said that it would review its new five-year plan, which is due to be rolled out at the beginning of next year. The plan projected that sales would grow at between 3 and 5 per cent and that operating profit margins would increase between 2 and 2.5 per cent. After carefully reconsidering these goals, the company said it would make another announcement in February to confirm whether or not the company was still on course.
But Unilever is not the only major multi-national consumer brands company feeling the pinch right now. Its announcement follows hot on the heels of a similar announcement by Colgate-Palmolive. Indeed, like Unilever, Colgate-Palmolive has been hard hit by fierce competition in the personal care segment. The only major player in the personal care that seems to be holding its head above water right now is P&G. It recently announced that quarterly results had been buoyed by a strong performance in developing markets.
