Coronavirus (COVID-19): Unilever highlights strength of long-term strategy

Jon Wright
Head of Insight - RA EMEA
@RetailAnalysis

Date : 27 April 2020

Following Unilever’s first quarter results we look at five key takeaways from the announcement and the impact that the coronavirus has had on its operations.

1. Change has required new ‘Agile markets organisation’

As a reaction to the pandemic Unilever said it had established a new structure to manage the organisation through its response to coronavirus. The five workstreams were built around:

  • People: focused on ensuring the safety of staff and protecting their incomes
  • Supply: to maintain availability of products, especially in its most needed and those highest demand products, such as hand hygiene and food
  • Demand: the changing patterns of demand, which varied by country, saw strong upswings in buying of specific products and shifts of where shoppers were buying products. Unilever highlighted the ‘near cessation of out of home consumption
  • Community: the need to continue to focus on society and the company’s long-standing belief in using its scale and brands as a force for good
  • Cash: to make sure it can invest for the long term. To support this it is ‘systematically reviewing all areas of cash generation and usage and re-evaluating all costs… so [it] can continue to invest in [its] brands and reallocate funds towards the best opportunities.

2. Lockdown having greater impact than channel or category shifts

Unilever said lockdowns, which limit shoppers’ movements, had had more of an impact on its performance during the quarter, with a strong skew towards March, rather than shoppers’ changing buying habits. The closure of out of home channels, food service and out of home ice cream, was highlighted as having a negative impact on the company’s performance, while channel switching, shoppers moving between stores and online, it noted had neither a positive nor negative impact.

However, Unilever’s chief executive, Alan Jope, said he believed the pandemic would lead to a longer-term shift in channel usage by shoppers. He said the pandemic would lead to an acceleration in the pace of growth for the online channel, saying he thought the pandemic could prove to be ‘a point of inflection for online grocery shopping.

3. Shoppers staying at home boosted some brands…

Echoing several suppliers, Unilever said its savoury and dressings brands had seen good growth as shoppers prepared more meals at home. A mixture of at home cooking and household stocking helped boost the sale of Knorr and Hellmann’s. This was supported by growth in its home care business. Surface cleaners, bleach and laundry products all benefited from shoppers staying at home and using the products more.

4. …While personal hygiene faced slowing demand

However, people being forced to stay at home during lockdown periods did not boost all its products’ sales. It said, while shoppers had bought more hair, skin care and deodorants in preparation for lockdowns, this had not lasted. Buying habits did not last suggesting shoppers were paying less attention to their personal appearance while having to stay at home.

5. Investment in marketing to continue

Contrasting with some other suppliers, who have cut back on their marketing efforts, Unilever said it would sustain its spending on brand and marketing investment. The company’s CFO, Graeme Pitkethly pointed out that “Advertising production has stopped and media rates have declined, so we can increase our advertising reach for the same level of spend.” However, it had shifted where it was investing its marketing spend given shoppers spending most of their time at home.

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