Dive Brief:
- Unilever reported strong half-year earnings Thursday and forecast better-than-expected margins for the full year, according to a company release. The company also said it's preparing to spin off its margarine-and-spreads business, which analysts predict could yield $7.5 to $8.5 billion.
- The packaged goods manufacturer, which rejected Kraft Heinz's $143 billion takeover attempt earlier this year, reported net profit of €3.11 billion ($3.58 billion) for the six months to June 30, compared to €2.51 billion ($2.90 billion) in the year-ago period. Revenue jumped to €27.73 billion ($32.08 billion) from €26.28 billion ($30.40 billion). Unilever said underlying sales rose in all categories aside from spreads, with its acquisitions of Dollar Shave Club and relaunch of Hellmann's mayonnaise boosting its personal care and food segments.
- “The actions we are taking keep us on track for another year of underlying sales growth ahead of our markets, in the 3% to 5% range," Unilever CEO Paul Polman said in the company release. “We anticipate accelerating growth in the second half of the year driven by the phasing of our innovation plans and a step-up in brand and marketing investment."
Dive Insight:
Unilever's many blockbuster brands like Dove soap and Magnum Ice Cream helped revenues expand. Aside from its underperforming spreads segments, underlying revenues jumped 3.4% in the period. Overall, the European mega-brand exceeded Wall Street expectations and followed through on its pledge to improve business after its rejection of Kraft Heinz's takeovover bid.
But the company's initiatives haven't all been successes. Unilever was believed to be a front-runner to purchase Reckitt Benckiser's food business, which includes French's mustard and ketchup. It was beaten out when McCormick & Company announced Tuesday that it would purchase the company for $4.2 billion. It's unclear whether a bidding war took place.
Still, Unilever's sale of its margarine business for $7.4 billion back in March gave revenues a healthy boost. Flora margarine is one of the company's billion dollar brands, but waning consumer interest in the product have dragged down sales in recent years. In the U.K., Flora sales fell 12% last year, along with sales of its other margarine brands, including Stork, Bertolli, and I Can't Believe It's Not Butter.
Innovations in new and emerging categories have also improved Unilever's business. In May, the company announced the addition of 16 new frozen treats across its beloved Breyers, Good Humor, Klondike, Magnum Ice Cream and Popsicle brands. These included Breyers' first non-dairy ice cream line made with almond milk and a new Simply Popsicle line that's free from artificial colors and flavors.
These in-house product developments, along with the decision to sell the margarine brands, reflect Unilever's careful attention to changing consumer tastes and preferences. The company is still playing things relatively safe by reformulating products under powerhouse banners, but these are strong steps forward.
It will be interesting to see if Unilever pursues similar product experimentation in other categories, and if it will seek out another manufacturer to acquire after its Reckitt Benckiser miss.