Unilever's Enhanced Growth Strategy: Innovation Over News Delivery

Unilever’s CEO Hein Schumacher says the business is becoming “simpler, better and more impactful” after it grew volume sales in the first quarter of its financial year.

In the quarter, the company increased its sales by 4.4% to reach a turnover of €15bn (£12.9bn) and saw a growth in volumes by 2.2%. Schumacher noted that the performance had improved, but acknowledged that there was still more work to be done. He took on the role of CEO in July and has committed to achieving faster growth and creating a more focused and productive organization.

As part of his strategy, he introduced a Growth Action Plan for the FMCG company with the aim of enhancing its competitiveness.

Today, speaking to investors on April 25th, he outlined a plan with three key elements. The goal is to achieve faster growth, operate in a more focused and productive manner, and sharpen our performance edge. The aim is to make Unilever simpler, better, and more impactful in everything we do.

We are looking for innovations that have the potential to scale and create value within their category for years to come. Our focus is on long-term success, not just constantly introducing new products that do not significantly impact our progress.

Hein Schumacher, Unilever

Unilever has been striving for faster growth by concentrating on its “power brands,” which make up about 75% of its revenue. In the latest quarter, these power brands drove growth by increasing sales by 6.1%, along with a 3.8% rise in volume sales.

Today, Schumacher informed investors that while the business is not overlooking its brands outside of the power brand portfolio, the primary focus is on the latter. The company aims to "do fewer things better and with greater impact", and has decided to separate its ice cream business, a move deemed strategically beneficial by Schumacher for both Unilever and its ice cream brands.

In addition to this strategic shift, the CEO's plan to boost growth in Unilever includes a strong emphasis on focused innovation.

“We are focusing on expanding the market and growing the category with larger, more impactful innovations,” he explained.

The company is currently working on a long-term innovation plan. According to him, they have already started to see positive results and gradual growth from their innovative efforts. He mentioned successful examples like Vaseline and Persil.

Schumacher mentioned that Unilever is utilizing their R&D knowledge for the launch of Persil's '15 Minute Wonder Wash', aiming to establish a new market segment by adapting to evolving laundry habits.

He emphasized the importance of developing innovations that can have long-term impact and contribute to the growth of the category, rather than just introducing short-lived updates that do not significantly impact the market.

Emphasizing Growth through Execution

Unilever is focused on achieving faster growth through its execution strategy. The company has conducted detailed assessments of its brands, covering a significant portion of its turnover. It aims to complete this process for half of its portfolio by May to ensure that these products maintain a high level of superiority.

Prioritizing Sustainability over Compromise

Unilever is committed to strengthening its sustainability initiatives without compromising on quality. The company believes in intensifying efforts in this area rather than diluting its sustainability goals.

Unilever recently made updates to its environmental and social goals. Originally planning to cut its virgin plastic usage in half by 2025, the company has now set a new target of reducing it by a third by 2026.

Additionally, Unilever has adjusted its commitment to ensuring direct suppliers receive a living wage by 2030. Instead, the company aims to implement fair pay practices for suppliers responsible for half of its annual spending on goods and services by 2026.

"Let me clarify, we are not diluting our efforts, but rather strengthening them," stated Schumacher. "We are intensifying our focus on key areas that have the greatest impact on our business, where a more concentrated approach will result in significant and widespread change."

During the investor call, Schumacher was questioned about whether the adjustments to their sustainability goals indicated that pursuing these initiatives had been more expensive than initially anticipated.

He explained that our increased dedication and sense of urgency to bring about meaningful change was not driven by concerns about high costs or financial burdens. Instead, it was a purposeful decision to enhance performance in ESG initiatives.

Editor's P/S:

Unilever's first-quarter performance reveals a promising path toward its objective of becoming "simpler, better, and more impactful." CEO Hein Schumacher's Growth Action Plan outlines a clear strategy for driving growth, focusing on "power brands," innovation, and execution. The shift towards a focused portfolio and the emphasis on impactful innovation should position Unilever for long-term success.

However, the adjustments to Unilever's sustainability goals raise questions about the challenges faced in balancing sustainability with financial constraints. While Schumacher asserts that the company is strengthening its commitments rather than diluting them, the revised targets suggest a need to re-evaluate the costs and feasibility of ambitious initiatives. Unilever's ability to maintain sustainability as a core value while ensuring profitability will be crucial for its future growth and reputation.