Unilever invests in marketing capability amid continued price rises

Unilever, the UK-based FMCG giant, saw sales grow but volumes dip in 2022, and with forecasts of moderate pricing pressures this year, it’s investing in a series of digital marketing, media, and e-commerce hubs to help sustain growth in a new commercial landscape.

Why it matters

The third largest advertiser on the planet by ad spend, Unilever’s brand and marketing investment grew by €500m over the course of the year amid greater competition for people’s already stretched wallets. As prices begin to fall, that increased competition is unlikely to deliver ready-made profits.

What’s going on

According to Unilever’s full year results for 2022, the company saw year-on-year sales grow 9%, while volume sales decreased 2.1%. Growing input costs (11.3%) in an inflation-afflicted year cut into the company’s margins, but it still managed to grow underlying profits by 0.5%.

“We did, however, continue to invest more behind our brands with brand and marketing investment up €0.5 billion in constant currencies versus the prior year and with more than 80% of that investment going directly into media,” explained CFO Graeme Pitkethly on a call with investors.

Pricing

“We think we are probably past peak inflation but not past peak pricing,” Pitkethly continued, adding that input costs were likely to be “significantly lower” in H2. Its strong brand equity was critical to maintaining market share earlier in the year.

Europe’s close proximity to the invasion of Ukraine has led to different shopping habits because of energy price aftershocks and new pressures.

“Price elasticity in Europe has increased during the course of 2022,” the CFO added, “and we've recently seen share gains by private label in Europe in most categories as the economic situation weighs on shoppers.”

Marketing excellence

A new point of discussion was an investment in 29 leading-edge, digital marketing, media, and e-commerce hubs. In the words of outgoing CEO Alan Jope, these hubs comprise “experts in media, in data-driven marketing, in content excellence and sales capabilities, and they will ensure that we deliver seamless consumer experiences and optimize our investment across all channels”.

It’s interesting to see a significant firm like Unilever reorganising some of its marketing capability, with e-commerce a critical function of marketing. This will be a development to follow closely.

Sourced from Unilever, Statista, WARC