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Competition bites at Unilever, Nestle under pressure

Thursday, October 19, 2017 - 01:49

Unilever has reported lower-than-expected third-quarter sales, losing market share to smaller competitors. As Sonia Legg reports, Swiss rival Nestle has also said increased restructuring costs would weigh on its margins suggesting perhaps that big isn't always beautiful in when it comes to global food and consumer goods.

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There's hardly a household in the world that doesn't have a product made by Unilever or Nestle. But the sheer size of the two food and consumer goods giants is often a challenge in a changing world. Unilever's been losing market share to smaller competitors. Third quarter sales rose 2.6 percent - well below expectations of close to 4 per cent - the amount the company's shares fell on the news. (SOUNDBITE) (English) CITY INDEX MARKET ANALYST, KEN ODELUGA, SAYING: "Unilever has been somewhat blown off course in the quarter by hurricanes in the United States and poor weather in Europe rather than the mechanical impact of the reduction of buying in the States. I think it's more to do with the fact that their leeway and ability to be nimble, has been compromised by their size." Many had hoped an attempted $143 billion takeover attempt by Kraft Heinz in February would have sparked a swift improvement. Instead Unilever's only gaining market share in half of its business - that's a 10 percent fall. Even an imminent sale could come a little late. (SOUNDBITE) (English) CITY INDEX MARKET ANALYST, KEN ODELUGA, SAYING: "Had Unilever had sold its spread business two years ago it would have been selling at the top of the market. If it's selling its spread business in 2017 I think it's somewhat off the top of the market in terms of the demand for that type of asset." The trend for fresh, healthier products is also a challenge for the Swiss maker of packaged food. Organic sales growth for the year is expected to be 0.3 of a percent less than last year. Seasonal factors - like the timing of Chinese new Year - were blamed. But Nestle's also restructuring - something it says it will speed up as pressure from activist investor Third Point increases.