Unilever confident on China

17 September 2012

BEIJING: Unilever, the consumer goods giant, is confident that its sales growth will remain robust in China, despite rising headwinds facing the country's economy.

The owner of Ben & Jerry's ice cream, Lipton tea and the Dove beauty brand has set the target of generating RMB50bn in revenue from China by 2020, a total five times greater than that logged in 2010.

Achieving this goal would require delivering growth of between 15% and 20% per year. Alan Jope, the firm's president for North Asia, revealed that it is currently meeting this benchmark.

"When we look at our own sales data, we will for sure enjoy another year of good double-digit growth this year," he told the Wall Street Journal.

Jope also warned, however, that such rapid expansion rates were not an indefinite proposition. One reason for this is because GDP growth slowed to 7.6% in the second quarter, the worst performance since 2009.

Moreover, as Unilever's returns rise, it will become difficult to yield the same acceleration levels in percentage terms, simply due to the scale of the figures concerned.

"How much of that is the tyranny of large numbers as we become a bigger business, and how much is underlying slowdown? There's different opinions even within our own business. But it's not a dramatic impact," Jope said.

In an indication of such trends, Burberry, the fashion label, last week forecast its global profits would fall below many analysts' expectations, adding that China was a "significant contributor to this result."

"We've heard a lot of stories about luxury as a consumer sector slowing and that doesn't surprise me," said Jope. "The consumer product sector is intrinsically a more stable sector."

In evidence of this, he reported that high-end face creams have seen demand decline dramatically in the last three or four months, while mass market lines have witnessed continued impressive growth.

Innovation will form a core part of Unilever's future plans. The firm recently announced it is open a new RMB300m plant in Sichuan, enhancing its ability to make products tailored for Chinese shoppers.

"We've seen the new brands we introduced to China in the past several years doing very well and we'll continue to do so in the future," said Jope.

Data sourced from Wall Street Journal; additional content by Warc staff