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Emerging Markets, Productivity Key at Deutsche Bank Conference

Unilever’s Jean-Marc Huet and Procter & Gamble's Jon Moeller were among Wednesday's speakers in Paris.

PARIS — Emerging markets and productivity were key topics covered Wednesday during Deutsche Bank’s 11th annual Global Consumer Conference here.

Unilever chief financial officer Jean-Marc Huet addressed investors’ concerns about the ongoing potential of such markets.

“Emerging markets’ income levels are only going to improve,” he said during a presentation, which was Webcast live. “By 2020, 1.3 billion more consumers will be active in our categories…. It’s a fundamental driver to our business.”

Different levels of per capita consumption in various categories give wide potential for growth, he added.
“Turkey would be 11-times bigger if [consumers] used as many deodorants as in Brazil,” he said by way of example, also citing the potential of countries such as Ethiopia, and continuing opportunities for distribution expansion in others, including India, Indonesia and China.

“These markets are very far from maturity,” said Huet. “With the present portfolio, there is so much more to be done.”

Unilever generated 57 percent of its total business across all categories in emerging markets in 2013. The company is planning to double the size of its business over the next few years, and emerging markets are a key part of that strategy.

In developed markets, meanwhile, Huet said Unilever is concerned with maintaining consistent growth in the low-single digits, rather than aiming for higher numbers.

“The cost and investment to grow in developed markets today, especially Europe, is high,” he said. “If we can grow in developed markets 1 to 2 percentage points consistently … I’m happy.”
Huet also addressed questions on future acquisition opportunities.

“Bolt-on acquisitions remain absolutely our focus,” he said. “At this point in time, we are very focused on complementary acquisitions to our current portfolio.”

Buys in personal care, such as Alberto-Culver and Tigi, have been important in helping Unilever reduce its dependence on the food category in recent years.

In developed markets, personal care now makes 33 percent of Unilever’s sales, compared with only 24 percent in 2009.
Unilever reported 2013 personal care sales down 0.2 percent to 18.06 billion euros, or $23.98 billion at average exchange, although on a like-for-like basis they grew 7.3 percent. Total company revenues fell 2.9 percent to 49.8 billion euros, or $66.23 billion, as reported.

In his presentation, Procter & Gamble chief financial officer Jon Moeller focused on the company’s ongoing work on productivity gains, confirming that it will realize $1.6 billion in productivity savings this fiscal year, which ends June 30, up from previous estimates of $1.4 billion.

P&G is in the process of consolidating its manufacturing operations in the U.S. to multicategory sites to be nearer to consumers and retailers.

“We’re considering a similar strategy in Europe,” said Moeller. “It will leverage the scope of our productivity and distribution structure in a way we never have before.”

He explained that over the decades, P&G has integrated factories in various locations through multiple acquisitions, but that those factories are not necessarily close to population centers.

As for emerging markets, the firm is working “aggressively” to localize production in key growth areas, Moeller said, adding that will help it notably to counter the inflation and currency effects that have hampered business in certain markets in recent years.

“We are building 20 factories in emerging markets,” he said.

The company is entering new businesses while continuing to divest non-core activities. P&G has exited the pet nutrition and bleach categories in recent months, for example.

“[We will announce] a new category entrance in the next four months,” Moeller revealed, without going into more detail.