Unilever: locals are main competitors

Warc, 1 August 2014

LONDON: International rivals like Procter & Gamble and Colgate-Palmolive are not the greatest threat to Unilever, but instead the main competition comes from local brands in emerging markets, the FMCG firm's CEO has said.

In an interview with the Financial Times, Paul Polman said "regional players" in emerging markets have become the company's toughest competition, but he remained confident that Unilever has long-term opportunities in these markets.

For example, emerging markets will account for 80% of the world's population and new leaders in India and Indonesia have demonstrated the need for structural reform, which he said would help to accelerate growth.

Similarly, the Chinese government's drive for the country to become less dependent on exports will work to Unilever's advantage, he said, because "a company like ours is best served by inward consumption than by exports". So, "there is no cause for concern," he asserted.

Polman was speaking a week after Unilever reported its half-year results. While pre-tax profits rose 15% to €4.2bn in the six months to the end of June, boosted by disposals, analysts were disappointed that sales fell 5.5% to €24.1bn.

In order to boost sales, there has been speculation that the company would seek a major acquisition, such as Colgate-Palmolive, but Polman played down such talk.

"We always look at possibilities," he said. "Many people are focused on what they know of companies in the developed world, but there are many new companies that are coming along," he said.

Unilever currently derives 57% of its sales from emerging markets and Polman's strategy is to pursue organic growth in these regions to take the proportion to 75% while also launching premium and innovative products in developed markets.

Under his stewardship, the company has been selling off some slow-growth products from its food portfolio, such as Ragu sauce, but he cautioned against an assumption that this would extend to other categories, such as margarines and spreads.

He said: "Even if you don't like a business – and I'm not saying we don't – can someone else run it better than you? Otherwise, if you sell it and you don't get enough for it, it would not be the right thing."

Data sourced from Financial Times; additional content by Warc