Unilever’s Q1 results reveal declining ice cream and tea sales amid global lockdowns

23 Apr 2020 --- Unilever has revealed its results for the first quarter of 2020, which show flat underlying sales with a volume growth of just 0.2 percent. The Foods & Refreshment segments’ underlying sales declined 1.7 percent, with large volume declines in ice cream as the seasonal sell-in for out-of-home consumption is key markets was heavily impacted by lockdowns and the reluctance of distributors to commit to buying ice cream stock with an uncertain holiday and tourism season.

“COVID-19 is having an unprecedented impact on people and economies worldwide. Unilever has moved at speed to support our multiple stakeholders and maintain our operations through the crisis and prepare for growth in a new normal,” says CEO Alan Jope.

Turnover for the company increased 0.2 percent including a positive impact of 0.6 percent from acquisitions net of disposals and negative impact of 0.4 percent from currency, the consumer goods company highlights. Quarterly dividend maintained at €0.4104 (US$0.44) per share.

There was also a sharp decline in foodservice, as restaurants in China and elsewhere closed due to COVID-19 mitigation measures. This was offset by increased in-home consumption and household stocking in some markets, particularly the US and Europe, leading to volume-led growth in Savory and Dressings.

Meanwhile, tea declined low-single digit, impacted by India and out of home channel closures. The strategic review of the FMCG’s tea business is ongoing, according to Unilever.

“We have structured our immediate response into five areas: supporting our people; protecting supply; serving demand; contributing to society; and maintaining our financial strength,” continues Jope. “Our people are our priority and we moved quickly to ensure the safety of our workforce as well as to protect incomes and jobs. We are now focused on redeploying people to those parts of the business that are seeing high demand.”

Adapting through a crisis
The British-Dutch transnational company has been able to maintain the supply of products and revealed it is keeping its factories running through the challenges in local operating environments across the value chains. “We are also opening up new capacity where it is most needed, such as in-hand hygiene and food,” adds Jope.

Demand patterns are also changing, he highlights. “As the crisis unfolds around the world, we see upswings in sales of hygiene and in-home food products, combined with some household stocking, and near cessation of out-of-home consumption, which is particularly affecting our food service and ice cream business. We are adapting to new demand patterns and are preparing for lasting changes in consumer behavior, in each country, as we move out of the crisis and into recovery.”

Jope says the company “will continue to adapt throughout this crisis.” However, the unknown severity and duration of the pandemic, as well as the containment measures that may be adopted in each country, means that Unilever cannot reliably assess the impact across its markets and its business. “We are, therefore, withdrawing our previous growth and margin outlook for 2020.”

“Our portfolio, our financial stability and the quality of our leadership teams around the world mean that Unilever is well-positioned during this crisis and for the changing world that will come afterwards. The fundamental drivers of growth continue to be the key principles driving our execution as we remain focused on delivering superior long-term financial performance through our sustainable business model.”

A changing market
The spread of COVID-19 has led to extensive changes in the operating environment in F&B markets. The lockdowns and restrictions that have been implemented in many countries have varied in severity, but all have had some impact on consumer demand patterns and many have also had a significant impact on the supply of goods.

Most major markets, outside China, saw normal sales patterns in January and February with the full effects of COVID-19 impacting in March. The Chinese market slowed significantly during the lock-down period, which began in January, while Europe and North America saw a positive impact of household stocking in March.

Earlier this month, Hindustan Unilever Limited, Unilever’s listed subsidiary in India, completed the merger with GlaxoSmithKline Consumer Healthcare Limited. The transaction is in line with Unilever’s strategy to evolve the Foods & Refreshment portfolio into higher growth segments. In early April, Unilever also entered into agreements to buy out the minority shareholders of its subsidiary in Malaysia.

Edited by Elizabeth Green

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