'Resilient' Unilever plans to invest 'heavily' in marketing as lockdown eases

'Resilient' Unilever plans to invest 'heavily' in marketing as lockdown eases

Unilever financial results for the first half of 2020 (23 July) show a business rapidly adapting during the pandemic, mitigating the impact of Covid-19 with a 49% year-on-year growth in e-commerce sales.

The consumer goods giant delivered a better-than-expected decline and chief executive Alan Jope said the results “demonstrated the resilience of the business”.

As one of the world's largest advertisers, its moves will reverberate across the industry. It has shifted much of its marketing spend to the products it can actually shift – such as its hygiene business – and hopes to gradually bump spend up as lockdown eases in regions around the world.

The Drum explores what this means and why it matters.

Unilever's results at a glance

In the first half of the year:

  • Pretax profit was up 6%.

  • Turnover decreased from €26.126bn in 2019 H1 to €25.714bn.

  • Operating profit rose from €4.589bn to €4.672bn.

  • Beauty and personal care, home care, and foods and refreshment categories were all down from a combined €13.710bn to €13.292bn.

  • Free cash flow was up €1.3bn to €2.9bn.

  • Considering the circumstances, Unilever's performed well and is prepping for the ease of lockdown where consumer behaviour will shift once more.

How has Covid-19 impacted the business?

Unilever said there were “significant changes in the operating environment in our markets”.

  • Consumer behaviour changed, time spent at home was drastically up, and so it championed hygiene products to curtail the spread of Covid-19. It noted that China sales were hit first in January and reopened in some way around April. “In most other major markets” March was the first month of significant Covid-19 impact.

  • Channel closures as a result of lockdowns negatively impacted many markets. Food service declined by nearly 40% and out of home ice cream declined by nearly 30%. Shoppers moved from offline to online channels. Year-on-year, it grew e-commerce sales by 49%.

  • There was growth in home consumption of foods, ice cream and tea but fewer personal care occasions from going to work or socialising – beauty and personal care products declined 0.3%. Savings were made with a reduction in brand and marketing investment through lock-down periods in these categories.

  • Hygiene products grew, understandably in double digits. The Lifebuoy hygiene brand was pushed into more than new 50 markets. Meanwhile, Unilever increased its hand sanitiser capacity by around 600 times across several brands. On this agility, Jope said: "We had a very small hand sanitiser business with only two manufacturing sites. Now we are larger now than that of the market leader, last year in the whole of 2019." Much of its spend has been going into growing these brands, in anticipation of long-term demand.

How has Covid-19 impacted Unilever's marketing plans?

  • As consumer habits and quarantine rules fluctuated, Unilever's had to rely on "dynamic" marketing. Spend was temporarily reduced in "some channels and geographies" with investment moving to "growth opportunities", said Jope.

  • One positive is that media rates have softened, which Unilever will take advantage of. "We plan to invest heavily as lockdowns ease and consumers learn to live with Covid-19," Jope said. "We expect significant investment to support brand campaigns and product innovations tailored to this environment."

  • He noted that the focus for the rest of 2020 will "continue to be volume-led competitive growth, absolute profit and cash delivery as this is the best way to maximise shareholder value".

  • Unilever jumped 6.8% to the top of the FTSE 100 after the announcement.

Back in July, Unilever’s marketing boss, Aline Santos, talked The Drum through the firm's stance on the Facebook boycott and how it is tackling brand purpose in the time of lockdown.

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