For Unilever, a fast-moving consumer giant “crossing the border” in the food industry and daily chemical industry, 2020 really needs a good summary.
Today, the multinational giant, which is famous in the food industry for Carrefour, Lipton, Helu snow and food planning, released its annual report for 2020. According to the report read by xiaoshidai, Alan jope, the company’s chief executive, gave a detailed answer to such questions as the performance of the year of the epidemic, the impact of the epidemic and Unilever’s future strategy.
Now, xiaoshidai will show you the latest statement of the head of the 51 billion euro revenue company.
Epidemic accelerates behavioral change
In the above report, Qiao Anlu said at the beginning that the most painful thing in 2020 is that the epidemic has taken the lives of several companies at the same time, and expressed sympathy to them and their families.
“The impact of the epidemic on Unilever’s business is significant.” He said that a large number of state blockades have brought a sudden blow to many of the company’s products, including the 1.7 billion euro catering business, which has led to a sharp drop in their sales, some of which once fell by 70%. On the other hand, the demand for health and skin cleaning products has soared, and the sales of home-based food business has risen, reflecting people’s rediscovery of the fun of cooking at home.
He believed that with the supply chain and sales stabilized, the overall impact of the epidemic on Unilever was “smaller than expected”.
In answering whether the epidemic has changed consumer behavior for a long time, Qiao Anlu pointed out that the “new normal” has become a clich é. He mostly saw that changes were already taking place and speeding up. For example, online sales have become more common. Not only has the development of e-commerce platform accelerated, but also the integration of online and offline (Omni channel) has been faster. Last year, Unilever’s online sales revenue also increased by 61%.
Other persistent behavioral changes include that consumers will pay more attention to family and personal health, more consciously pursue brands they know and trust, and more attention to the impact of these brands on the environment. Under the epidemic situation, the working habits of consumers are bound to change, accelerating the trend of more flexible, agile and people-oriented office.
Focus on competitive growth
“In any crisis, it is important to act quickly to adapt to changing market conditions.” He said that Unilever’s refocusing focuses on competitive growth, basic operating profit and free cash flow.
Qiao Anlu revealed that in terms of competitive growth, the market share (in terms of sales) of Unilever’s business, which accounted for more than 50% of the total sales volume, increased last year, and this index has recently increased to more than 60%. Excluding the effect of exchange rate, the underlying operating profit improved last year. In terms of free cash flow, it recorded a record 7.7 billion euros last year.
When talking about last year’s highlights, Qiao Anlu listed several mergers and acquisitions, saying that they consolidated the company’s business portfolio and made Unilever competitive in the long run. Among them are Horlicks, the food industry’s winner, and smartypants vitamins, the maker of vitamin fudge.
Looking forward to 2021, Qiao Anlu believes that although the new crown treatment and vaccine have been reported frequently, the epidemic situation is “far from over”. Therefore, the most important thing for the company is to protect life safety and people’s livelihood. “The economic losses caused by the epidemic are far-reaching.” For this, he said, companies need to be prepared to continue to focus on competitive growth this year. In addition, we should focus on developing those brands that are in line with the trend and driven by the mission, and bring them to more people faster.
Tea business “flying alone” at the end of the year?
Although there is no separate disclosure of sales in China in this annual report, “China” has been mentioned 44 times. Unilever pointed out in its strategic description that it should further expand its scale in the three markets of the United States, India and China. At present, these three markets account for nearly 35% of its sales revenue.
Looking at this report, xiaoshidai noticed that the food sector’s share of Unilever’s total revenue increased from 37% in 2019 to 38% last year, and contributed 33% of the underlying operating profit, while the profit margin decreased from 17.5% to 17%.
Among Unilever’s list of businesses that need to focus on high growth areas, plant-based food is on the list, including the cooperation between its vegetarian butcher products and Burger King in China. The company hopes to generate 1 billion euros in sales of its plant-based products by 2025-2027.
In terms of food and beverage planning, due to the closure of the catering industry, the business’s revenue fell 30% last year, but it still launched a new platform called “pushing plants forward” to enable chefs to meet the consumer demand of the trend of plant-based food. Sales of ice cream also fell, but Unilever’s ice cream products for home use rose instead of falling.
As for Lipton’s tea business, this annual report clearly points out that it has come to the conclusion that it will divest this business. It is reported that Unilever spent 6 million euros on the audit of the financial statements of its separate tea business last year.
Unilever is the world’s largest tea merchant, which purchases 10% of the world’s black tea every year. Xiaoshidai noted that as Unilever also has a business listed in Nigeria, the company issued an announcement on the local exchange at the end of February, requiring Unilever to divest its tea business in Nigeria and become an independent legal entity. The announcement also revealed that the separation plan will follow the conventional approval process and is expected to be completed by the end of 2021.
This means that tea business in other parts of the world may soon carry out similar “solo” operations, although Lipton’s business in China has not been adjusted.