Price cuts fail to grow sales for Unilever

Consumer products giant Unilever conceded today that price cuts and an advertising blitz had failed to return sales in Europe to growth.

The maker of Knorr and Domestos said underlying sales in the region fell 2% during the three months to September 30 – largely from making its products cheaper.

Its aggressive marketing strategy in Europe was also eating into profits, which were down 5% at €1.45bn across the group.

This meant Unilever’s surplus for the first nine months of the year was 7% lower than in 2004 at €3.84bn in spite of sales growth in the Americas and emerging markets in Asia and Africa.

Chief executive Patrick Cescau said: “Western Europe remains difficult and we have not yet made the progress in restoring growth that we have elsewhere.”

Sales of laundry products in Europe were disappointing and Unilever confirmed it was losing market share, while ice cream sales declined sharply during the quarter.

But there was growth in savoury items and dressings, and personal care ranges, and Unilever has recently launched a string of new products, including Domestos drain unblocker and Sun 4-in-1 dishwash tablets.

The Anglo-Dutch group insisted it would continue to focus on price and promotional activity in Europe as the best way to compete against rivals and protect its share of the market.

Despite the negative sales trend in Europe, Mr Cescau said the progress in boosting competitiveness and stripping costs out of the business was encouraging.

Underlying sales growth of 5% in the Americas between July and September and 11% in Asia and Africa meant the company had now improved its overall performance for four quarters in a row.

“The higher and more consistent weight of market investment behind our priorities is showing through in continued volume growth and stable market shares, with some gains in key battlegrounds,” Mr Cescau said.

Unilever, whose brands also include Magnum ice cream, Lipton Ice Tea and Hellmann’s mayonnaise, launched a five-year Path To Growth strategy in 2000 in a move aimed at concentrating on its 400 leading products.

But the transformation programme failed to live up to City expectations, as Unilever disclosed in February that annual profits slumped 36% to €2.9bn.

Today’s results shed no new light on whether Unilever will sell its frozen foods business after it announced in September that it was considering its options.

The frozen foods division covers Birds Eye in the UK, where the company operates manufacturing facilities at Hull and Lowestoft, as well as the Findus and Iglo brands outside the country.