A HUGE boost to advertising and promotional spending pushed Unilever’s global sales back on to a growth track last year. Europe, however, continued to lag and the soaps to foods group had a torrid 12 months in the UK where sales tumbled by 4 per cent.
Unilever spent an extra €500 million promoting its products in 2005, with two thirds of the money going into advertising as the company defended its brands from an assault by competitors.
The spending paid off, restoring growth to Unilever’s portfolio of consumer brands which include Persil, Dove, Knorr and Lipton’s tea.
Globally, sales were up 3.1 per cent in the year and rose by 5 per cent in the fourth quarter as Unilever’s promotions halted the advance of Procter & Gamble’s rival products.
Unilever’s margin recovered from a dip into negative territory in the fourth quarter of 2004, when the company made a pre-tax loss of €398 million, compared with a profit of €916 million in the three months to the end of December.
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For the full year Unilever’s margin was 13.4 per cent compared with 11 per cent in 2004, with pre-tax profits rising 28 per cent to €4.7 billion.
Patrick Cescau, Unilever’s chief executive, said the company had stabilised its market share and restored growth to its top line. In Europe, the underlying sales erosion was trimmed from a negative 3 per cent in 2004 to a decline of less than 1 per cent.
Better sales are being generated without price increases, he said. Weak economies, retail discounting and “general morosity” were preventing Unilever from passing on the burden of rising commodity prices.
The weakened state of continental consumer markets has focused competition on the UK, where the company is taking a pounding in its laundry and personal care businesses. “It is competitive, we face a very difficult environment and we suffered in 2005,” M Cescau said.
The company is focusing spending on its big performers with global campaigns such as Dove, which enjoyed a 10 per cent rise in sales last year. Dove’s “real beauty” ads, a campaign devised in the UK using amateur models, has been taken on a world tour but the ads have subtle differences, M Cescau said. In Brazil, the women embrace each other in a sensual pose while the American “real women” barely touch.
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The Unilever chief said the company would improve its margin further, with additional savings of €700 million in 2006 and a total cost reduction of €1 billion by the end of 2007.