Roy Davidson, 27 June 2019



Unilever (ULVR) is one of the world’s leading manufacturers of consumer goods. Every day, 2.5 billion people use the company’s 400 products, which include household names like Dove, Rexona, Sunsilk, Lipton, Surf and Magnum. ULVR operates across three divisions, the largest being Beauty & Personal Care, followed by Foods & Refreshment and lastly, Home Care.

Commitment to research and development should underpin future growth

The re-focusing of the company on innovation and the speed with which they introduce brands into new markets has been a key driver of the turnaround seen in the business over recent years. The proportion of ULVR’s turnover coming from products launched in the last two years continues to be above 30%, and the company has a strong pipeline of new products under development.

Getting personal

While investors used to think of ULVR as a food company, it is increasingly perceived as a Home and Personal Care company and management is focused on accelerating growth in these two segments. Home and Personal Care currently account for just under 60% of revenue but given the company’s focus on M&A it’s likely to become much larger. Management view ULVR as a natural consolidator and given the pace of change within the sector, M&A will be a core part of the company’s growth strategy. Over the last few years ULVR has been divesting its fragrance brands to focus on skin and hair care. The company’s acquisition of Alberto-Culver in 2011 (gaining assets such as Alberto VO5, St. Ives, TRESemmé, and Consort) has been very successful. More recent acquisitions in beauty - Dermalogica, Kate Somerville, and Dr. Murad – fit perfectly into its strategy to be a global leader in skin and hair care.

Long-term thesis unchanged

Emerging market growth has stabilised over the last few quarters and remains to be the primary growth driver for the company with sales growth from developed markets still subdued. While there are clear improvements being seen in the US economy, ULVR noted the gap between low and high incomes continues to grow and signs of improvement in ULVR’s markets remains muted. The long-term opportunity in emerging markets remains compelling. Firstly, emerging market consumption per capita remains well below that of developed markets. Secondly, population levels are also significantly higher in emerging markets, adding further weight to the argument.


Over the long-term, ULVR has provided attractive returns with a much lower level of risk relative to the broader market. We regard ULVR’s earnings as relatively defensive – they sell products consumed on a daily basis, demand for which is typically not impacted by the broader economy. Lower risk companies such as ULVR should prove less volatile than the broader market.


  1. an increase in the cost of raw materials
  2. acquisition and expansion risk
  3. ULVR’s high exposure to emerging markets making it more open to currency movements