Unilever goes sour in emerging markets

The Wall's and PG Tips owner has had its worst rate of quarterly sales growth for four years, it said this morning.

by Emma Haslett

Another company showing you can rely too much on emerging markets: Marmite maker Unilever has just posted its worst rate of quarterly sales growth in four years, with underlying sales growth of 3.2%, down from 5% in the last two quarters.

Third quarter sales were €12.5bn, down 6.5% from the same time last year. And although underlying sales in emerging markets grew 5.9%, that’s down from 12.1% growth during the same period last year.

Paul Polman, the company’s chief executive, called it a ‘warning sign’.

‘We knew that we could not maintain the double-digit growth [in emerging markets] seen over the last nine quarters…. [but] we’re not going to waver from our strategy if we have a 3% quarter.’

The problem for Unilever is that it relies heavily on developing economies: they account for more than half of its sales. And although the fast-growing BRIC countries were seen as an investor’s dream during the downturn, now western economies are recovering and the US is even hinting at winding down its money-printing, investors are ploughing cash back into those countries. Bad news for companies that have come to rely on rapid growth in emerging markets.

We knew this was coming: in September the company issued a sales warning, saying it expected sales growth to hit between 3% and 3.5% this quarter – so the company’s share price has remained flat.

At the time, Polman was adamant the company was just having a blip. ‘We are still on course to deliver against our priorities,’ he said.

He’s still optimistic, though : ‘We continue to believe our footprint in emerging markets… positions us well for the long term,’ he said today. To be fair to Polman, if there's one thing he has proved, it's that he's genuinely committed to the long term. So here’s hoping…

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