Unilever promises more cheap goods and cost cuts to tackle slowdown

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UNILEVER promised investors that new, cheaper products and more cost cuts would help it grow profits, even as reticent consumers dragged its sales growth in the third quarter to its weakest in nearly five years.

Europe’s persistent woes and a slowdown in emerging markets, where Unilever has more than half its sales, have weighed on the maker of household brands from Dove soap to Omo detergent.

In Britain, relatively wealthy consumers have snapped up premium goods like the company’s £10 Regenerate toothpaste, or its £29 jars of Maille mustard with wine and truffles. But the company said that most consumers in most countries are cutting back.

To grow even as families tighten their belts and turn to discount stores, Unilever is introducing cheaper products, like smaller Cornetto ice cream cones that sell for 1 euro in Spain or 1 lira in Turkey. It is also putting more emphasis on a local food brand in Brazil, Arisco.

“We’ve learned from the previous economic crises the importance of having such value brands in the portfolio that can capture some of the downtrading that inevitably happens when disposable income levels fall,” said chief financial officer Jean-Marc Huet.

Unilever, which has factories in Leeds, reported a 2.1 per cent rise in third-quarter underlying sales growth.

Sales volume, measuring the amount of goods sold, rose only 0.3 per cent, below analysts’ estimate of 1.8 per cent and growth of 1.9 per cent in the first and second quarters.

“This was an unimpressive quarter from Unilever, where we thought the stars were nicely aligned,” said a RBC Capital Markets analyst, citing weak comparisons with a tough year-earlier period, repeated warnings from the company and a low stock valuation. “The relatively low valuation remains, but on this evidence, rightly so,” he added.

Bernstein Research analyst Andrew Wood said Unilever’s sales growth was the lowest since the fourth quarter of 2009.