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Unilever’s chief executive has said growth in its China business will be “subdued” for “quarters to come”, as it became the latest company to warn of weak consumer demand in the region.
The consumer goods group reported better than expected quarterly sales on Thursday, boosted by a strong performance from its ice cream division, which the Marmite and Magnum maker said it was aiming to list by the end of next year.
But sales in China declined by a “low single-digit”, with lower demand for high-end skincare, make-up and food products triggering a rethink of Unilever’s sales strategy in the country.
Chief executive Hein Schumacher told reporters on Thursday that the China market was “under pressure”, adding that the company’s brands in the country were “not in growth mode at this point in time”. He said Unilever was “revamping” its China operation to adapt to shifting consumer behaviour.
Consumer and luxury stocks including L’Oréal and LVMH have reported a hit from stubbornly weak demand in China in recent weeks.
Unilever said it was also making “decisive interventions” in Indonesia, where sales fell 18 per cent in the third quarter amid operational issues and consumer boycotts in response to the war in Gaza. In February, the company said Indonesian consumers were shunning multinational brands “in response to the geopolitical situation in the Middle East”.
Schumacher said the slump in sales did not reflect boycotts, but rather various operational changes Unilever had been implementing, from pricing to branding, adding the company was making “drastic” changes in Indonesia.
Despite those issues, global sales in the three months to September rose 4.5 per cent, beating a company-compiled consensus estimate of 4.2 per cent, and helped by strong performance from its ice cream unit. The volume of goods sold climbed 3.6 per cent, with revenues flat at €15.2bn.
Sales of Unilever’s ice cream brands, which include Ben & Jerry’s and Wall’s, soared 9.8 per cent compared with the same period last year, well above the 4.3 per cent growth expected by analysts.
Factoring out the ice cream business, Unilever’s sales grew 3.6 per cent in the third quarter.
Schumacher said the planned separation of the ice cream business — which Barclays estimates could be worth as much as €17bn — and a plan to boost productivity that involves laying off 7,500 staff, were progressing as planned. He said the separation would be complete by 2025 and the ice cream unit “will be listed”.
Earlier this year, the Financial Times reported that Unilever had appointed bankers to approach potential private equity buyers of the ice cream division, which is run from Rotterdam, rather than the group’s London headquarters.
“We are obviously talking to various stakeholders, that includes the exchanges, tax authorities and governments,” Schumacher told reporters, adding that the details would be announced in the first half of next year.
Unilever is in the middle of a turnaround that, after years of disappointing financial performance, has cheered investors. Its shares were up about a fifth in the year to date before Thursday’s update, and rose a further 3.5 per cent in early trading.
“After the weakness over the past month, and in particular yesterday in the wake of the results out of Asia, these results are reassuringly robust, and should be well-received in our view,” said Bernstein analyst Callum Elliott.
This month, Unilever sold its Russian business for €520mn to industrialist Alexei Sagal’s chemicals group Arnest. The businessman has also acquired Heineken and Ball Corp’s Russian assets.
Unilever’s Russian operations included four factories and accounted for approximately 1 per cent of the group’s turnover and net profit in 2023.
Meanwhile, France’s Danone posted a 4.2 per cent rise in like-for-like sales in its third quarter, beating analyst estimates. This was helped by a 3.6 per cent increase in sales volumes, led by strong demand in North America for high-protein products.
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