Unilever cuts prices to avert sales crisis

Flagging sales force the household goods giant to slash prices and boost marketing spend

Unilever is expected to slash the price of its product range, which includes Dove, Flora and Persil, as it seeks to boost flagging sales and escape its current crisis of low sales growth, according to City sources. The recent Procter & Gamble acquisition of Gillette is likely to force Unilever to ratchet up spending on marketing and advertising.

The Anglo-Dutch household goods giant is also likely to invest heavily in new product development in a series of moves that are likely to dent the company’s profit margins in the short term.

Unilever is expected to announce a radical shake-up of its structure along with its full-year results tomorrow (Thursday), which analysts believe will deliver profits of up to £2.6bn.

A City source says: “Unilever has been investing in price by cutting prices, bonusing retailers and through in-store promotions. That will be accelerated this year and it has to display a renewed commitment to new product development, particularly in food.”

But the observer thinks it unlikely that Unilever will either sell off its Bestfoods division or make any significant acquisition in the food sector. Some believe that the Unilever Cosmetics International division could be sold off.

Other speculation suggests that Unilever’s complex management structure will be slimmed down. Sources hint Antony Burgmans, the Dutch co-chairman, will become executive chairman, while French co-chairman Patrick Cescau will become chief executive, arguably the more powerful position. Observers believe this will simplify the company’s structure.

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