Unilever pledges to maintain marketing spend amid rising costs

Unilever says its current level of brand and marketing investment is at “the right level”, despite admitting it will have to raise product prices due to increasing commodity costs.

Speaking on an investor call this morning (21 October) announcing the company’s third quarter results, CFO Graeme Pitkethly said Unilever would continue to invest in and “support the long-term health” of its brands, claiming the business was experiencing product test “wins” against competitors and “healthy brand power measures”.

“Over 80% of our turnover has been stable or growing brand power, and our share of advertising spend relative to our share of the market has been maintained well above the 100 index,” said Pitkethly.

“While 2020 saw significant variations between H1 and H2 in BMI spend phasing, we think the amount of investment for the full year was at about the right level and we’re looking to maintain it at broadly similar levels this year.”

Earlier this week rival Proctor & Gamble vowed to boost digital marketing spend and maintain marketing levels despite rising commodity prices.

It’s a myth that the infinite shelf of ecommerce favours middle and small size brands.

Alan Jope, Unilever

Turnover during the third quarter was €13.5bn (£11.3bn), an increase of 4% compared to the same period in 2020. Sales for the past nine months are up 1.7% to €39.3bn (£33.1bn).

Unilever CEO Alan Jope said ecommerce is “amplifying” the FMCG giant’s bigger brands.

“It’s a myth that the infinite shelf of ecommerce favours middle and small size brands. Ecommerce is very favourable to relevant big brands – they’re first on search [engines] and shopping lists,” said Jope.

Unilever’s aggregate ecommerce business grew 38% in the third quarter, which is “well ahead of the market” according to Jope. Ecommerce now accounts for 12% of total turnover, up from 11% in the previous quarter.

Digital skills were highlighted as a key capability being expanded on this year. In April, Unilever accelerated its ecommerce learning programme for staff, which resulted in more than 15,000 certifications being achieved to date. Additionally, 80% of staff now feel “strongly engaged” with the business.

“This [staff engagement] is well into the top quartile of benchmark companies. And it’s worth noting that engagement has strengthened considerably through Covid and the challenges of remote working,” Jope added.

Chartered Institute of Marketing chief executive Chris Daly said: “Unilever has identified ecommerce as a key channel for the future – not only for sales, but also for advertising. Its strategy is evolving, moving away from traditional platforms such as TV and towards gaming and streaming platforms.”

He also pointed to collaborations with videogames Fortnite and Animal Crossing as future marketing strategies that will “pay dividends in the future”, by attracting younger consumers.

Focused innovation

Pitkethly also noted the “tremendous activity and change” in Unilever’s research and development department. He explained innovation across science and tech has been “completely reviewed” to make the work more “focused and strategic”.

“The overall shape of what R&D spend looks like today, relative to say three or four years ago, is quite different,” said Pitkethly.

He pointed to the brand implementing new technologies to run 12,000 digital experiments on products, instead of carrying them out physically. The advantage is this approach reduces costs, trial periods and time to land on shelves.

P&G vows to increase digital marketing spend amid growing cost pressures

“We also build automated technology into our innovation centres, like our materials innovation factory in the UK. There’s a huge number of robots doing material chemistry work for us and it generates lots and lots of data much more quickly than traditional methods,” Pitkethly explained.

The company has also been collaborating with external partners to develop “great science” in products and packaging for brands such as Dove and Persil, with 70% of innovations stemming from external collaboration.

“What we’re seeing is great science come through into our innovations. Examples of big focus areas are in next-generation biology, such as the microbiome, biotechnology and surfactants,” added Pitkethly.

“Almost everything we do has a sustainable packaging and format angle. We think this is really important for consumer preference in the long term.”