Unilever boosts ad spend in high inflation environment

The CPG aims to prevent consumers from switching to private label goods amid a staggering increase in price.
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Unilever increased brand and marketing investment amidst broad based growth and big price spikes.

For the first half of the year, Unilever’s underlying sales grew 8.1%, topping analyst expectations of 7.2%, and Unilever is reporting its going to also top its previous forecast for full year growth of 4.5% to 6.5%.

Unilever says it’s been “quick to price,” and that price has sequentially stepped up over the past two quarters, reaching a whopping 11.2% year-over-year growth in the second quarter, which has deleteriously affected volumes.

According to the maker of Dove, Knorr, Hellmann’s and Ben & Jerry’s, “in the first half [it] increased absolute brand and marketing investment, and [we] will again invest competitively in marketing, R&D and capital expenditure in the second half.”

Brand and marketing investment was stepped up by €200 million in constant exchange rates, which equated to a 40 basis points contribution to margin.

In today’s conference call, Unilever’s CFO Graeme Pitkethly said that the hike in advertising and branded marketing is to prevent shoppers from trading down to private label.

He emphasized the “fundamental importance” of its investment in digital, marketing, supply chain and relationship with customers.

“Digital investment is enabling us to better understand consumer needs and better serve customers,” Pitkethly says.

According to CEO Alan Jope, Unilever’s brands are in good health, with 80% stable or growing in brand power. It also announced “judicious disposals,” like unloading its tea business Ekaterra for €4.5 billion.

Home Care brands were particularly exposed to rising input costs as the division took the highest pricing action, leading to underlying sales growth of 10.7%.

Beauty & Personal Care grew 7.5%, driven by price and continued strong growth in Prestige Beauty and Health & Wellbeing – Unilever’s vitamins, minerals and supplements business.

Foods & Refreshment grew 7.3% with slightly negative volume at 0.9%. Ice cream out-of-home and Unilever Food Solutions showed strong double-digit growth in the first half, compensating for lower growth of in-home ice cream (40% of its total ice cream business compared with 60% for OOH). Magnum and Cornetto continued growth momentum supported by new variant innovations, while ice cream suffered from supply issues stateside.

By market, North America grew 8.7%, helped by strong performances of dressings and its businesses in high growth areas such as Health & Wellbeing, with stronger numbers in physical store visits.

Ecommerce sales for Unilever grew 25% in the first half, while pure play was flat thanks to COVID measures in China. In five years, ecomm is 14% of turnover from 2%.

 

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