Unilever stumbles on Path to Growth

CONSUMER products giant Unilever was in danger of seeing its flagship Path to Growth strategy fall flat today after sales of key brands stalled.

Unilever, led by Irishman Niall FitzGerald, shocked investors with a 0.2% fall in second quarter sales for its 400 leading products, which includes Hellmann’s mayonnaise and Dove Soap.

Price competition, weak consumer confidence on the continent and the impact on comparable figures of strong ice cream sales last year were blamed by Unilever, which saw shares fall by as much as 5% today.

The market had expected sales growth from Unilever’s leading brands of up to 2.5%, building on an improvement of 1.3% in the first three months of 2004.

The focus of investors will now be on the merits of the five-year Path to Growth strategy, which was unveiled by Unilever in late 1999 and involved focusing on key products and offloading non-core operations.

Chairman Niall FitzGerald said at the time the company was seeking 6% to 8% annual growth from its leading brands, in contrast to the flat sales reported today.

Investec analyst David Lang said the Path to Growth strategy was “unfinished business” and some divisions of the company, especially frozen foods, were taking longer to fix.

However, Mr Lang expected sales to improve during the next financial year.

Cost-cutting measures combined with lower tax and interest charges following disposals were the main reasons why Unilever was able to grow pre-tax profits by 19% to €1.17 billion.

Unilever reported weak consumer confidence in many of its key markets, with conditions particularly difficult in Germany, France and the Netherlands.

Rivals were also pricing more aggressively and sales of personal care products in Europe have begun to fall at the same time as home care markets continued to decline.

New management at the Prestige fragrances division were making progress and an improved performance was expected from fragrances in the US in the second half, with Hollywood actress Scarlett Johansson endorsing Eternity Moment.