Unilever credits ‘effectiveness of innovation’ for Q1 growth

Unilever has credited innovation and investment in its brands for underlying sales growth of 10.5% in the first quarter of the year. Group turnover for the period reached €14.8bn (£13.12bn), a 7% increase compared to Q1 in 2022.

Innovations include nanotechnology from Dove, plastic-free packaging for Persil, the continued premiumisation of Magnum, and new flavour variants for Hellmann’s, all of which the business believes has helped it prosper.

“We have stepped up both the effectiveness of our innovation and the investment behind our brands,” said Unilever CEO Alan Jope of the figures. This investment is set to continue, with money from cost saving programmes to be reinvested in brands.

The group’s 14 powerhouse ‘billion euro’ brands accounted for 54% of turnover in the first quarter, with underlying sales growth of 12.1%. Persil (known as Omo in some markets), Hellmann’s, Rexona (Sure in the UK) and Lux all delivered a strong performance, though growth was spread across brands and the five business groups of the company.

Most of our retail channels are becoming media platforms, and many media platforms are becoming retail channels.

Alan Jope, Unilever

“Our billion euro brands grew faster that the rest of the portfolio,” said Jope. “We do continue to prioritise our investment behind our billion euro brands, which are also benefitting from the strongest innovation line-up that we’ve had for many years.”

Unilever said it is still on track to deliver €600m of cost savings over the next two years following the introduction of its “simpler, more category-focused operating model” last July. This includes its five core business groups – beauty and wellbeing, personal care, home care, ice cream and nutrition – and tech-focused Unilever Business Operations division. It said today the majority of the saving would be delivered in 2023.

Its beauty and wellbeing, personal care, home care and nutrition divisions each saw turnover of more than €3bn during the quarter, with the ice cream division accounting for €1.7bn.

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Unilever said earlier this year it would be ramping up marketing investment during 2023, after increasing its spend by €500m last year, and has restated its commitment to that investment. “We will continue to price and drive our cost savings programmes in order to allow us to invest behind our brands,” the company confirmed.

“We are continuing to execute well on our strategic priorities,” added Jope. This has included a shift in its brand portfolio into higher growth areas – leading to the sale of the Suave brand in North America, and the introduction of a new operating model designed to unlock faster decision-making.

“Premiumisation is an explicit part of the organic growth strategies of all five business groups,” said Jope. “Prestige beauty and health and wellbeing have now achieved nine consecutive quarters of volume-led, double-digit growth. We aim to continue this momentum.”

Digital growth

Jope also applauded the contribution made by Unlever’s digital marketing, media and ecommerce hubs, known as DMCs.

“Turnover coming from digital commerce was 15%, and we also saw underlying sales growth of 15%,” he said. “Our DMCs really are delivering leading edge digital capabilities to help capture these opportunities in high growth channels like social commerce and quick commerce.”

Changes in the these areas are being felt at a fundamental level.

“Most of our retail channels are becoming media platforms, and many media platforms are becoming retail channels, and it is our DMCs that are giving us the ability to take advantage of this secular trend towards convergence,” said Jope.

In common with many companies, Unilever has raised its prices to reflect the growing cost of materials and labour. The company notes that price growth remains elevated at 10.7%.

“We remain focused on navigating through continued macroeconomic uncertainty and are confident in our ability to deliver another year of strong growth, which remains our first priority,” said Jope.

Jope is to step down as Unilever CEO in July, with former Heinz finance boss Hein Schumacher set to take over at the helm.