Unilever puts greater focus on innovation to drive up prices

Unilever is putting a greater emphasis on innovation to drive up prices in European markets including the UK after blaming the impact of the discounters and promotions by rivals for causing a decline in the value of what it sold in Europe.

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Sales for the second quarter fell 0.8 per cent to €3.6bn in Europe as volume growth failed to offset price declines.

Speaking on a conference call this morning following the results, chief executive Paul Polman said Unilever is embarking on an “innovation drive” to improve its pricing mix and boost sales across its business. He said pricing, particularly in Southern Europe, has been affected by factors including weak consumer confidence, the rise of discount chains and the aggressive promotional response by other retailers.

“In developed markets most consumers are not seeing a pick-up in the economy and they are increasingly value conscious. Competition is increasingly high. We are taking balanced decisions on pricing, always with a watchful eye on consumer affordability,” he added.

In the UK, where sales were up slightly, Unilever has launched a new oral care brand, Regenerate, that offers a “unique formula” that helps rebuild tooth enamel. It is priced much higher than regular toothpastes, at £10, with the range also including a serum that costs £30.

Unilever says the early response to the product has been good and it offers a good example of how it is using technology across its businesses, from personal care to food, to allow it to differentiate from the competition and “realise premium pricing”.

Unilever is also making use of its Sustainable Living Plan to spot opportunities for growth and innovation, citing the success of its compressed deodorants in the UK where sales are growing in the mid-single digits. There are plans to roll the products out to other European countries over the coming months.

Unilever is not increasing marketing spend in Europe to boost sales, with investment on “brand and marketing” down in the quarter. Polman said Unilever is focusing its brand building efforts on supporting its digital channels and moving money away from non-working media.

However across the rest of the business brand and marketing spend was up by 10 basis points, the sixth successive year of “absolute increases” in investment as Unilever poured more marketing money into emerging markets and its North American business. For example in India it introduced a free mobile radio channel that offers entertainment interspersed with Unilever product ads and is listened to by eight million people.

“We are continuing to focus on innovation, portfolio reshaping and driving efficiency, doing the right things to adapt to a world that is increasingly volatile and unpredictable,” said Polman.

Overall, Unilever’s sales were up 3.8 per cent to €12.7bn in the second quarter, boosted by a 5.1 per cent increase in emerging markets, although growth here is slowing. Across developed markets, which include Europe and North America, sales grew by 0.3 per cent.