Maintenance of this year's profit targets in the face of weakened sales across the Unilever brand portfolio [WAMN: 30-Jul-04] could be at the expense of advertising and brand promotion, many analysts and investors fear.

No so, insists the Anglo-Dutch foods and household products giant. The issue was raised by worried institutional shareholders at a number of meetings earlier this month, and all were assured that overall investment in Unilever brands -- which range from Persil laundry products through Birds Eye frozen foods via Lipton tea to Sunsilk shampoo -- will remain 'competitive'.

But many still fear that advertising and promotional expenditure, recognised as the lifeblood of brands, may be sacrificed to the holy grail of earnings per share.

Muses Boudewijn de Haan of Robeco, a Dutch fund manager and Unilever shareholder: "They are committed to make the earnings guidance but I am not sure if that is the right thing to do … you can make this EPS growth target but maybe it is very destructive to the overall business for several quarters or years to come."

Another haruspex, Andrew Wood of Sanford C Bernstein, went even further [to the point of sacrilege in Wall Street terms, some might think]. Investors, he said, might even be relieved if Unilever issued a profit warning rather than persisting in "doing significant harm to the business in under-investing in [advertising and promotions] to meet its margin and EPS goals".

But despite an apparent slowdown in adspend, the consumer goods giant insists it is maintaining marketing momentum via other methods.

It cites the spending of substantial funds on so-called BOGOF [buy one, get one free] offers, which for accounting purposes are lopped straight off sales revenues rather than expensed as advertising and promotions.

Assuages Unilever chairman Niall FitzGerald: "It is just a shift in spending". He also expressed his confidence that the profit target could be achieved "without any mortgage to the longer term health of the business".

Data sourced from: Financial Times; additional content by WARC staff