Unilever eyes acquisitions

15 October 2009

LONDON: Unilever, the FMCG company, is hoping to make further acquisitions in the future, as it seeks to expand its portfolio of brands and take advantage of the possibilities offered in this area by the financial crisis, according to Paul Polman, its chief executive.

As previously reported, Unilever bought Sara Lee's personal care operations for €1.28 billion ($1.91bn; £1.19bn) last month, meaning the company has now "sharpened its value equation", according to its ceo.

Speaking at the annual IGD Convention in London this week, Polman, who has previously argued that the Anglo-Dutch firm could benefit from the recession, added that he was "always looking" for viable targets.

"Times are good right now. There are good brands out there. We'll see even more consolidation than before," he said.

With regard to the economic climate more broadly, Polman warned it was important to be "prudent", and to recognise that trading conditions have dramatically changed since the onset of the downturn.

"Over the last ten years the industry benefited from booming economies. You have to be careful. The amount of deleveraging that has to be done is enormous."

More specifically, the situation in the UK has been particularly adverse, with consumers heavily cutting back on their expenditure levels.

"The UK has found itself firmly in the eye of the economic storm with more deleveraging to do than many other countries. With job losses as well as taxes increasing, household budgets are going to remain tight for some time to come," Polman said.

"We're in an industry driven by employment and consumer confidence and unfortunately both indices are not going to show a significant improvement in the near future."

One more positive trend that has emerged from this process is an increasingly close relationship between major retailers and manufacturers.

"The increased co-operation between retailers and brands is driven by the customer. Consumer confidence is not going to change, it drives us to make efficiencies," said Polman.

The owner of Knorr and Axe has also seen its sales figures continue to grow in developing markets, which now deliver some 51% of its total revenues.

Polman suggested that "the next 1 billion consumers will come from" these areas, adding that Unilever was "very well placed" in most key countries at present.

Russia will be one "focus market", as will India, China and Thailand, all of which are still delivering upticks in sales.

"Perhaps it's at a little lower level than before but they are still showing growth and have a tremendous opportunity to grow further," Polman said.

While a strong presence in less established regions was once seen as being "risky", it is now fundamental for many companies, he added.

Moreover, a growing number of brands could begin to expand from emerging markets to the West, with Unilever already having developed some dental products in this way.

Overall, Polman suggested that, despite the current conditions, there is "always an opportunity for the brave and the smart".

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