Unilever downbeat on Europe's prospects

14 December 2012

LONDON: Unilever, the FMCG group, believes trading conditions are set to remain difficult in Europe for the next decade, while the growth of the "emerging poor" is also posing problems in the US.

Speaking to Bloomberg, Paul Polman, Unilever's chief executive, predicted that the outlook is likely to retain its current negative shape across many major European markets.

"We are in for at least ten years of slow economic growth in Europe, and I don't see that changing," he said. "If you run a business like mine and don't assume that, you are fooling yourself.

More specifically, he argued the differing opinions of political leaders in France and Germany, and the fact their UK counterparts are "not willing to participate fully", is hampering progress.

"I hope for the benefit of Europe I am proven wrong, but even then we are in a better position by taking that as our starting point. The key thing is to see reality in the eye."

Turning his attention to the US, Polman stated that 46m consumers, part of an "emerging poor", now depend on government benefits to buy food, and wait to receive paychecks before making purchases.

"People scrape by until the end of the month," he said. Indeed, the country may only witness a 2% expansion in GDP "if you're lucky", he added.

At present, Unilever yields around 25% of its sales from Europe and 16% from the US, according to figures from Berenberg Bank and RBC Capital Markets.

While emerging markets, which today generate a majority of Unilever's business, offer a degree of insulation, the longer term prognosis is troubling at the international level

"What we see globally is a difficult situation ... where issues in Europe and the US are not being addressed at the speed that they should be addressed," Polman said.

One strategy being pursued by Unilever in response to the crisis has been to roll out smaller pack sizes, such as by selling Surf detergent in cheaper containers providing roughly five washes in Spain.

This builds on models popularised in nations like Indonesia and India, where single sachets of shampoo and similar lines have helped broaden its reach among less affluent buyers.

Data sourced from Bloomberg/Daily Telegraph; additional content by Warc staff