Unilever: No effect from U.S. slowdown
CHICAGO (Reuters) - Unilever Plc/NV (ULVR.L)(UNc.AS), the world's third largest food group, said on Tuesday it has yet to see signs that a slowdown in the United States was hitting its foods business or that consumers were switching away from its leading brands to cheaper products.
The Anglo-Dutch maker of such foods as Hellmann's mayonnaise, Lipton tea and Skippy peanut butter said it has offset the sharp rise in commodity costs by increasing its prices and cutting costs, and had seen no immediate effect on its sales.
"We have not witnessed it yet. Our business is still strong," Bauke Rouwers, a Unilever executive, told the Reuters Food Summit, when asked if he had seen the U.S. slowdown affecting the group's food business.
"We are confident on the guidance we gave the outside world, confident to get through in an uncertain world and the rise in commodity prices," said Rouwers, senior vice president of foods for its Americas region.
Unilever, which trails Nestle SA (NESN.VX) and Kraft Foods Inc (KFT.N) in sales, has already forecast its 2008 underlying sales will increase at the top of its long-term range of 3 percent to 5 percent and hit its 2010 margin target of more than 15 percent.
Last year, Unilever increased prices by 1.8 percent across its global business -- including food as well as its soaps and detergents operations -- to compensate for commodity price hikes, such as the sharp rises in soyabean oil, milk and crude oil. Those were the main increases to hit its U.S. foods business.
Rouwers said he was surprised by how easily the company was able to implement food price increases with retailers. He cited the general recognition that a wide range of commodity prices had risen sharply.
He added that Unilever was less exposed to the biggest commodity price hikes than other food groups. Its business was also helped by fast-growing health and wellness products, such as low-fat mayonnaises and pasta sauces, while it continued to take sugar, fat and salt out of its products.
The group has seen good growth from Hellmann's, cholesterol-lowing mini drinks sold in the U.S., such as Promise Activ supershots, low-fat ice-cream and Lipton tea, which was promoted for its health benefits.
In addition, taking fat out of products such as its mayonnaises has helped Unilever cut costs by including less expensive vegetable oil.
Rouwers said food markets are not easily affected by economic upswings and downswings, but clearly the group's trend toward health and wellness products is helping weather the slowdown in the U.S. economy.
"It is a bit more challenging as the U.S. economy slows and commodity prices rise, but we are still confident of our guidance," he added.
Unilever beat its long-term 3 percent to 5 percent sales guidance in 2007, with an annual rise of 5.5 percent. But its Americas region showed just 4.1 percent growth, with the U.S. up only 3.2 percent after suffering from lower ice cream sales.
The overall annual 5.5 percent increase was below European rivals -- with Nestle managing 7.4 percent growth and Paris-based Groupe Danone SA (DANO.PA) at 7.2 percent in 2007. Just last week, Swiss-based Nestle, in an upbeat trading statement, said it expected its 2008 growth to be near to that in 2007.
(For summit blog: summitnotebook.reuters.com/)
(Reporting by David Jones, editing by Jeffrey Benkoe)
