unilever (ulvr) annual investor seminar 2016: five key ...€¦ · 1 december 2, 2016 deborah...

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DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

UNILEVER (ULVR) ANNUAL INVESTOR SEMINAR 2016: FIVE KEY TAKEAWAYS

1) Unileveristofocusondrivingsalesofitscoreportfolioinhigh-growthsegmentsandonreducingcosts;thecompanyanticipatesannualcoreoperatingmargingrowthtorise from the current rangeof 20bps–40bps to40bps–80bpsbetween2017and2019.

2) Unileverwillcontinuetofocusonevolvingitsproductportfolioanddevelopingthechannelsthroughwhichitreachesitscustomers.

3) In the foods segment, millennial consumers’ focus on health, wellness andvegetarianismisamongthekeytrendsonwhichUnileverwillconcentrate.

4) Inpersonal care,Unilever anticipates strongdemand formen’s groomingproductsandproductsmadefortheMuslimconsumermarket.

5) Sustainabilityisanimportantfocusacrossallcategories.

Fast-Moving Consumer Goods leader Unilever hosted its Annual Investor Seminar onNovember30,2016.Hereareourfivekeytakeawaysfromthepresentation.

1) UNILEVER TO FOCUS ON CORE, HIGH-GROWTH PORTFOLIO AND INCREASE COREOPERATINGMARGINBY40-80BPSBETWEEN2017AND2019

CFOGraemePitkethlyoutlinedUnilever’sstrategicagendaforthenextfiscalyear,andthisfocuses on driving sales, reducing costs and growing the operatingmargin by 40-80 basispointseachyearbetween2017and2019(fromcurrentannualmargingrowthof20-40basispoints).Unileverplanstoincreasesalesinthreeways:

• By increasing penetration of high-frequency ranges—i.e., those products boughtmostoften.

• By strengthening the company’s core portfolio of products in high-growthsegmentssuchasbeveragecapsulesandmen’sgrooming.

• Byhavingfewervariantsandofferingmorechannel-specificpacksandsizes.

To reduce costs and grow its core operating margin, Unilever has deployed zero-basedbudgeting.Pitkethlynotedthatthisapproachhasresultedinover€1billionofcostsavingsfor Unilever, through better visibility and higher accountability across functions andsegments.

Manyofthesecostsavingshavebeeninthemarketingfunctionandingeneraloverheads.Forexample, thecompanyhelpedcutmarketingcostsbysettingupan in-housestudio tocreate content.Unileverhas alsomade cumulative investmentsof about€5.0billionoverthelastsixyearstoimproveitsITinfrastructureandsupplychain.Itplanstoexpanditscost-saving focus to these functions from previously being focused onmarketing and generaloverheads.

2) UNILEVERTOFOCUSONEVOLVINGITSPORTFOLIOANDDEVELOPINGTHECHANNELSTHROUGHWHICHITREACHESITSCUSTOMERS

Unilever aims to evolve its current product portfolio to include a more diverse range ofproducts and it expects to spend between €1 billion and €3 billion per annum onacquisitions till 2019. It undertook a number of acquisitions over the last year, such as

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Dermalogica,SeventhGeneration,DollarShaveClubandBlueair.Acquisitionswillhelpthecompany capitalize on faster-growing, higher-margin segments. Theywill also provide thecompanywithnewchannelstoreachcustomersdirectly.The company expects to reach more customers by developing partnerships with onlineplayers. Unilever has been working closely with Alibaba Group since 2010 and thispartnership has helped it gain over one million new franchisees. One of the tools thathelped it reachdeeper, remoteregionsof ruralChina is throughAlibaba’sTaobaoVillagesprogram,whichbringstogetherclustersofvillagesandsellersonitsonlinemarketplace.

3) MILLENNIALCONSUMERS’FOCUSONHEALTH,WELLNESSANDVEGETARIANISMAKEYTRENDFORUNILEVER’SFOODSEGMENT

Amanda Sourry, President of the Foods segment, and Kevin Havelock, President ofRefreshments,bothemphasizedthatthereisagrowingawarenessofhealth,awarenessandvegetarianism, which Unilever has considered in its forthcoming product developmentstrategies. To this end and in keeping with the zero-based budgeting approach, it haspartneredwithanagritechuniversitytoworkonbetterproducts.IthasalsopartneredwiththeEuropeanVegetarianUnion to createa scalableplan for itsbusinessandcreatemoreveganproducts.

Whilethereisanawarenessofhealthandwellness,thereisalsoademandforflexi-eatingor consuming food on-the-move. This is another key macro trend driving the food andrefreshmentsegmentthathaspushedthemtodevelopnewerproductformats.

Source:Shutterstock

4) STRONGDEMANDANTICIPATED FROMTWOCONSUMERCATEGORIES INPERSONALCARE:MENANDMUSLIMCONSUMERS

AlanJope,PresidentofPersonalCare,notedthatmenandMuslimconsumersaretwohigh-growthconsumersegmentsforthiscategory.Henotedthatmen’sgroomingwasa€3billionbusiness for Unilever, with nearly €0.5 billion coming in from its DoveMen+Care brand,

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evenbefore itacquiredtheDollarShaveClub.Henotedthatthecompanyanticipatesthiswill grow further, and the acquisition of the Dollar Shave Club has provided it with anopportunity for cross-category expansion and to reach the consumer directly through thesubscriptionmodel.

Jopestatedthatthenumberofmiddle-classMuslimconsumersissettotripleby2030,andthat Unilever already has a strong presence in most Muslim markets. He said that thecompany plans to create products more suitable to the climatic conditions in thegeographies where these consumers are present, mainly the Middle East and parts ofSoutheastAsia.Unileveralsointendstoincreaseitsmarketingandpromotiontoconsumersintheseareas,topushfurtherintothemarket.

5) SUSTAINABILITYANIMPORTANTFOCUSINPRODUCTDEVELOPMENT

SustainabilityinthesupplychainisanimportantfocusacrossallsegmentsatUnilever,andthe heads of the segments outlined some of the initiatives undertaken by them. SourrynotedthatUnileverhasundertakenacommitmenttosourceallfoodonlyfromsustainablesources.HavelockaddedthatsomeoftheteaplantationsareownedbyUnilever,andit isworkingwithsupplierstoimprovethewaystheproductissourced.

NitinParanjpe,PresidentoftheHomeCaresegment,notedthatUnileverhasdevelopedafabric conditioner that involvesusing lesswater for regions that have a scarcity ofwater.Another sustainability initiative it hasundertaken is to identifyways to reducepackaging,thecostsinvolvedinitandthewastethatresultsfrompackagingmaterial.

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalyst

SwaroopraniMuralidharResearchAssistant

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unilever (ulvr) annual investor seminar 2016: five key ...€¦ · 1 december 2, 2016 deborah...

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