Unilever Hamburg, Germany

LONDON Unilever is committed to becoming a “fully purpose-led,” sustainably-minded organization, according to the new chief executive officer Alan Jope, who delivered a set of uneven results for the first half ended June 30.

In the first six months, sales at the parent of Dove, Dermalogica, Magnum and Hellmann’s, dipped 0.9 percent to 26.1 billion euros, while underlying growth rose 3.3 percent, fuelled by all the main product divisions, and prestige beauty in particular.

The small decrease in first half turnover was due to the sale of Unilever’s spreads business to KKR in late 2017, and was partially offset by a 1.1 percent currency benefit, the company said in a trading update.

E-commerce, Unilever’s most important distribution channel, was a bright spot, with the division growing 30 percent in the six months. Trends in the second quarter were in line with the first half, with turnover broadly flat at 13.7 billion euros.

Underlying sales in the beauty and personal care category rose 3.3 percent in the six months to June 30, with 1.7 percent coming from volume and 1.6 percent from price.

Unilever’s prestige brands, including Dermalogica, Hourglass, and REN, saw double-digit growth in the six months. The company also acquired the Garancia and Tatcha brands in the period.

Jope said on an investor call that prestige brands have become a 600 million-euros-plus business, “and they’re making a nice contribution to the beauty and personal care division.” He added that brands such as Dermalogica, Hourglass and Living Proof were “leading the growth charge,” and that he was looking forward to adding Garancia and Tatcha, “two more purpose-led, fast-growth brands.”

Operating margin overall in beauty and personal care improved, driven by efficiency programs in brand and marketing investment, Unilever said. Jope added that the division was the “highest priority” for Unilever, and while the prestige brands may be soaring, there was still work to do in hair care, especially in North America.

The ceo said Unilever, which sells brands such as Dove, is fighting to keep up with its competitors in North America. “We are the leader there, and it’s important we recover our competitiveness,” he said. “We are super-committed to hair care and to our efforts in turning around that hot spot.”

In the six months, emerging market sales growth was 6.2 percent, while European and North American growth was held back by the impact of the cold, wet weather that bit into ice cream sales.

In Europe, sales were down 0.6 percent in the period. “Our European business faced challenges from continued price deflation and adverse weather in the second quarter. The broader retail environment remains difficult, particularly in Germany, where we saw significant decline,” Unilever said, adding that southern Europe performed strongly, helped by growth in home care and foods and refreshment. Central and Eastern Europe continued to grow well.
Underlying sales growth in North America was flat in beauty and personal care, with good momentum in deodorants was offset by weak performance in hair.

In the emerging markets, China and South East Asia showed “good momentum” with India also making gains. Argentina remains hyperinflationary, with high levels of pricing continuing to weigh on consumer demand, the company said.

“We have delivered consistent growth within our guided range for 2019, led by our emerging markets,” said Alan Jope, chief executive officer. “Accelerating growth remains our top priority, and we continue to evolve our portfolio and seek out fast growth channels and geographical opportunities, as well as address those performance hotspots where growth is falling short of our aspirations.”

Jope said that for the full year, Unilever continues to expect underlying sales growth to be in the lower half of its multi-year, 3-5 percent range, with an improvement in underlying operating margin. At the same time, Unilever said it witnessed a slowdown in growth in the last 12 weeks in Europe, and the company is expecting a similar trend in the U.S.

“Our sustainable business model and portfolio of purpose-led brands are key to delivering superior long-term financial performance,” he said.

During the call, Jope pointed to strides on the sustainability and purpose front, such as a pilot in the Philippines called the Re-Fillery, that saw customers taking their old bottles to a pump-style station and re-filling them with shampoo and conditioner. Jope said the pilot contributed to a double-digit increase in hair care in the region.

In the first half, Unilever also spearheaded the cleaning of 2,000 mosques in 13 cities across Indonesia and said that, as a result, home care sales in the region were up in the “high single digits” in the first half.