Supplier insights: Unilever: five takeaways from its H1 results

Jon Wright
Head of Insight - RA EMEA
@RetailAnalysis

Date : 24 July 2020

Following Unilever’s Q2 / H1 results announcement we look at five areas it highlighted and the learnings others can take from the global business.

1. Online shift seen globally and across operating models

Much discussed as a driver of online’s expansion, the pandemic has led to fast paced growth globally. Unilever discussed how it was seeing the channel advance in several of its key markets and across a range of operating models too. In total ecommerce sales grew by 49% in H1, with the pace accelerating in Q2 to reach 62%. The company called out three markets’ growth rates as part of its presentation: North America, where sales rose 177% in Q2; China, +59%; and Brazil, +48%. The overall effect of the development saw ecommerce accounting for 8% of Unilever’s sales at the end of H1 2020, versus 6% in the same timeframe in 2019.

The company also highlighted how the growth had come across a range of operating models, underlining shoppers’ growing awareness of the new channels they have access to and willingness to trial them. Unilever said pure-play ecommerce sites saw sales growth of 58%, while omnichannel retailers’ sales advanced by 120%. As part of the announcement Unilever discussed the success it had seen in relation to its Ice Cream Now home delivery ecommerce business, which was first launched in February 2020.

2. Online developments informing shoppers’ media consumption…

Building on shoppers’ changing buying habits, Unilever also noted the associated shift that had occurred in relation to their medium consumption too. The company pointed to how it has reallocated its brand and marketing and that it had had to remain agile to adapt to these changing needs on a week by week basis. It highlighted how due to a deflationary environment in media rates in had been able to do more with less. Unilever highlighted the success it had enjoyed in relation to Knorr's digital recipe inspiration campaign and its Recipedia website, which together had supported the wider drive towards ecommerce and had help drive ecommerce conversion.

3. …And encouraging purposeful communication

One area Unilever feels it remains key to communicate around is the positive contribution it is making to society. Through its communication it is aiming to look at the issues its shoppers are concerned about and discussing them in an authentic way. As the pandemic has gone on the company has invested more of its marketing spend on communication that is explicitly purposeful. Unilever sees the need to be consistent in the way it communicates with shoppers is key both during the pandemic and as markets exit the effects of the crisis.

4. Innovation needs to be more focused and drive benefit

As part of the update Unilever acknowledged the need for continued innovation of its products and offer. It said the process needed to become more targeted as ‘focusing the portfolio of innovation will drive higher overall incremental turnover’. As a company it said it had become too willing to ‘address every opportunity locally, which it was now keen to roll back from. This would enable it to concentrate its resources behind fewer bigger innovations, which creates more of an impact and provides better growth.

Certainly as other suppliers highlight the impact of SKU optimisation processes on their operations, Unilever’s step seems to help it align with what retailers are aiming to do now too. This is also enabling it to remove complexity and focus on innovations shoppers are looking for because of the pandemic. It highlighted how it was investing ‘in the hygiene category, in driving healthy in-home eating, offering better valued products, and innovations… designed for some of the fast-growing channels, in particular e-commerce.’

5. It is preparing for an expected recession

Despite the overall positive tone of the announcement, Unilever said it was preparing for any economic downturn and the effects this could have on shopper confidence and buying patterns. It noted ‘that talk of a quick recovery is definitely at the optimistic end of the scale. A deep global recession has already started and consumer habits are changing quite dramatically’. The company noted how its portfolio segmented between value, which it estimated was about 20%, mid-tiers, about 45%, and about 35% in premium. It said to prepare for the expected downturn it had ‘set up… targeted squads [who were] working to identify and plug gaps in the value portfolio market by market, particularly in low unit price packs and lower tier brands’.

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