Unilever Is Out To Win Market Share From All The Geographies

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Mar 31, 2015

A well known brand globally, Unilever Plc. (UL, Financial) continues to give a tough fight to its biggest competitors on the brand portfolio front as well as well as stock front. The company has some power-packed fast-moving consumer goods (FMCG) brands which are used every day by billions globally. In all, the company has roughly around 400 brands, of which 14 are one dollar brands and 11 brands have found their way in the list of world’s top 50 FMCG brands of 2014. Lux, Knorr, Dove and some other famous brands of Unilever account for almost 54% of the company’s sales. The low oil prices and the resultant cheaper commodity prices have acted as a tailwind for Unilever. It has helped the company to achieve the desirable results and the stock has performed well on most benchmarks. The weakening Euro is also helping in Unilever’s case. Let’s check out how Unilever has grown into a FMCG giant while P&G (PG, Financial) has been in shrinking mode.

Consistency in brand performance

Most of the Unilever brands have been making good money for the FMCG major; hence there is hardly any shakeup in the brand portfolio. But that is not the case with its bigger U.S. competitor, Procter & Gamble Company, which shelved off close to 100 brands in February this year. P&G has decided to revamp itself by divesting, discontinuing or consolidating the 100+ brands to become agile and attain profitable numbers. The offloading spree continues even in March 2015. Late last week on March 19, the company decided to sell off its perfume and fashion brand Rochas to Interparfums, a French firm for $108 million. In fact, in December 2014, Unilever bought over Camay and Zest soap brands from P&G. The fact that P&G has so many underperforming brands to be offloaded speaks to its incompetency; whereas Unilever is in an advantageous and strong position whereby it not only has well performing brands but the company also has the capacity to accommodate the undesired P&G brands and turn them into profitable ones. Unilever certainly has got things going right for it in the brand mix front.

Being present at the right place and at the right time

Unilever is a master in developing economies that contribute to its fortune. Unilever sensed the business potential of a country with vast population like India more than a century ago. Hence within 43 years of shipping its first soap brand to the Indian shores (1888), the company set up an Indian subsidiary in 1931. Such a wise decision has given the company the first mover advantage and helped it capture a huge portion of the consumer spending on FMCG. Its arch rival P&G entered the Indian market in 1963. Unilever had a leap of more than a century in terms of the magnitude of brand loyalty enjoyed by its brands Sunlight, Surf Excel, Rin, Wheel, Brook Bond Tea, Lipton Tea, Lux, Vim, Lifebuoy, Lakme, Ponds, Fair & Lovely, Kissan, Dove, Pears, Pepsodent, Sunsilk, Clinic Plus, Clear, Vaseline, Knorr, Kwality Wall’s, Closeup and so on and so forth. Many of these brands are used by 80%-90% of Indian households. These brands are unshakeable; they are legends in themselves; something a competitor like P&G can hardly manage to put a small dent in. It is simple math when one converts the sales volume in proportion to the population of the country which is nearing the 1.3 billion mark. The Indian story stands true for many other developing and emerging Asian economies. The company certainly has made the right moves on the chess board.

Dividend track record

Unilever has a very strong track record of strong dividend payouts. The company has been able to pay incremental dividends to its shareholders in the past few years. In 2014 Unilever paid euro 0.2850 for all the four quarters, the latest installment of the fourth quarter one paid on March 11. In 2013 it paid euro 0.2690 for all four quarters. In 2012, 2011 and 2010 the company paid euro 0.2430; euro 0.2250 and euro 0.2080, respectively, for all quarters.

Conclusion

Some analysts believe that the stock valuation of Unilever is very high. Despite this fact, the stock continues to enjoy a favorable stand from most analysts. Some analysts attributed the strengths of the stock for a double digit growth prediction for decades to come. The company definitely has the right moves up its sleeve. Hence, the future estimation on Unilever Plc. stock is a "Buy" and "Hold."