Unilever's innovative CEO revolutionizes product excellence for unparalleled customer satisfaction

Unilever's recently appointed CEO, Hein Schumacher, has expressed his commitment to prioritizing product superiority. This comes as the company reports a modest increase in margins during the first half of its financial year. In his inaugural address to investors, Schumacher highlighted his passion for the dynamic nature of the FMCG industry and Unilever as a whole.

I have been impressed by many aspects of the company in my early weeks here. However, I see a great opportunity for us to enhance our performance and competitiveness and generate substantial value creation in the future, particularly regarding the superiority of our products.

During a recent call with investors on July 25th, I expressed my desire to witness our products outperforming the competition on a regular basis. It is crucial for our brands to consistently win superiority tests, and if they do not, we must take immediate and decisive action.

In the FMCG industry, consumers have the ultimate authority, which emphasizes the importance of ensuring our products surpass the competition. Unilever's most recent results reveal that only 41% of our business is currently gaining market share on a rolling 12-month basis. Therefore, it is crucial for us to strive for more of our products to outperform our competitors.

Hein Schumacher, the CEO of Unilever, faced criticism from investors for prioritizing brand purpose over product.

Investing in brands

Schumacher revealed his commitment to prioritizing product development while serving as the leader of the consumer goods giant. Previously, Conny Braams, Unilever's chief marketer who will also be leaving the company in August, emphasized the importance of focusing on offering the appropriate products at the correct price over promoting a purpose-driven approach in the organization.

Schumacher emphasized the importance of product excellence and highlighted a strong emphasis on innovation and sustainability. He further expressed his commitment to embracing Unilever's recently implemented business structure, which divides the company into five specialized business groups, including ice cream, nutrition, and personal care.

Schumacher expressed his desire to maintain and enhance the existing structure, focusing on cultivating a "performance culture" at Unilever.

Graeme Pitkethly, the chief financial officer, highlighted the significant impact of the new business structure, resulting in more ambitious and substantial investment choices. As an illustration, he mentioned Unilever's personal care division sponsoring the FIFA World Cup. This partnership began with the ongoing Women's World Cup and is scheduled to continue until 2027.

"It would have been extremely challenging to make such a massive global investment within the constraints of our previous organizational structure," stated Pitkethly.

In the first half of 2023, the company allocated an additional €400m (£344m) to bolster its marketing efforts, with a focus mainly on consumer-facing media. Unilever had previously pledged to further increase its marketing expenditure in 2023, building upon the additional €500m (£430m) invested the previous year. In 2022, the company allocated approximately $7.5bn (£5.4bn) towards marketing initiatives.

Improving margins

The company, which is the owner of well-known brands like Hellmann's, Persil, and Dove, announced a profit of €5.2bn (£4.5bn) for the six-month period ending in June. This signifies a 3.3% increase compared to the same timeframe from the previous year.

Additionally, the company's gross margin indicates improvement, with a year-on-year growth of 30 basis points to 0.3%. However, it still falls short by 270 basis points compared to the levels seen in 2019. Pitkethly, while addressing investors, highlighted that this modest improvement can be attributed to a strong emphasis on pricing and cost savings.

Unilever reported a 2.7% increase in the company's turnover, which amounted to €30.4bn (£26.2bn). This growth was primarily attributed to the 9.1% underlying sales growth driven by the implemented pricing strategy. While there was a slight decline of 0.2% in sales during the half year, it was counterbalanced by a significant 9.4% increase in prices.

In Europe, there was a significant decrease in volume sales, declining by 9.7%. However, sales managed to continue growing by 4.3% due to a price increase of 15.5%.

Charli Huggins, the manager of the quality shares portfolio at Wealth Club, considers these results to be solid but uninspiring.

Unilever should definitely be performing better. Margins remain significantly lower than pre-pandemic levels, and beneath the surface of their strong underlying sales growth, there are underlying issues, especially in Europe.