Anglo-Dutch consumer giant Unilever said today (4 February) it still has “a long way to go” in Western Europe as annual sales volumes in the region again dipped in 2009.
Volumes in Western Europe dipped 0.1% last year, with Unilever seeing volumes across the group rise 2.3% in 2009 and accelerate to climb 5% in the fourth quarter of the year.
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CEO Paul Polman told analysts this morning (4 February) that there are “a number of areas” in Western Europe in which Unilever has to “step up” and added that he would increase A&P investment in the region in 2010.
Unilever underlying sales in Western Europe fell 1.9% in 2009 and operating margin was also down by 240 basis points, largely due to an increase in marketing and the negative impact of a weaker sterling on its UK business.
Speaking at the firm’s earnings conference, Polman told attendees that Western Europe remains a “tough environment” on macro-economic level, which reflected in Unilever’s results.
Nonetheless, he said: “I believe our organisation is doing an outstanding job. We have seen our volumes progress throughout the year and we’ve seen our shares increase throughout the year in fairly tough conditions.
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By GlobalData“We have made a conscious decision that we should not manage Europe just for profit but we should grow Europe for shareholder value creation. That was our strategy last year and again we are executing against that strategy.”
As a result, Polman said the firm intends to increase A&P spend in Europe, particularly in Western Europe, in a bid to support the strategy.
“If you look at Western Europe right now, our gross margins are up and our A&P are up and these investments are starting to pay out,” Polman said.
“I think you will see further A&P investments this year in Western Europe. The reason is that we have had so many innovations that accelerated over the back half of the year. There is no reason, as we will continue to capture efficiency over 2010, why we would not reinvest that in A&P to further strengthen our brands. We still have many places where we are not as competitive as we should be.”
Polman added: “We still have a long way to go, we still have much to do in Western Europe in terms of areas that we have got to step up. But there is a growing sense of confidence in the team and belief that we can win.”
The chief executive this morning said the consumer goods giant made “good progress” in 2009 with rising underlying sales and volumes accelerating throughout the year. He added that the firm was “moving fast towards a stronger performance culture” and that innovation and a “step-change” in advertising had made its brands “stronger”.
This was despite a fall in annual profits. Net income in 2009 slid 31% to EUR3.66bn (US$5.07bn), while operating profit dropped 30% to EUR5.02bn.
Polman told analysts: “I fully expect that the environment in 2010 will be just as tough as 2009 and we are prepared for that. We have the confidence that comes from strong delivery in 2009. But we are far from complacent. We know that competition will be tougher and that consumers will be even more demanding.”
He added that the firm’s priorities for 2010 will now be to drive volume growth, while providing a “steady improvement” in underlying operating margin and strong cash flow.
