Product Innovations Drive Unilever Forward

Unilever experienced good growth due to its ongoing innovations, while Procter & Gamble and Colgate-Palmolive also focus on product innovations to drive their future business growth.

Jan 23, 2014 at 9:21AM

Unilever (NYSE:UL) received a lift in the stock market after reporting growing operating performance for the full fiscal year 2013. The company's share price increased by more than 3.8% in after-hours trading, to $41.35, because of its better-than-expected 2013 earnings results.

While most big and global consumer-goods companies, including Procter & Gamble (NYSE:PG) and Colgate-Palmolive (NYSE:CL), experienced a growth slowdown in the emerging markets, Unilever managed to raise its 2013 emerging markets sales by 8.7%, with a 4.8% increase in volume. Innovation is one of the most important factors behind this decent growth.

Unilever's growing operating performance was driven by product innovations
Overall, Unilever's core earnings per share came in at €1.58 per share, much better than its EPS forecast of €1.53, while the underlying sales growth jumped by 4.1%, higher than the Wall Street's growth expectation of 3.9%. Whereas the underlying sales jumped by 4.6%, Unilever's 2013 total turnover dropped 3%, caused mainly by a 5.9% foreign currency depreciation.

At the constant exchange rate, Unilever has managed to increase its gross margin by 110 basis points (bps) to 41.2%, driven by product innovations, low-margin business divestment, and cost-saving initiatives. Because the advertising and promotion spending was 50 bps higher and overhead was up 20 bps, Unilever's core operating margin rose by 40 bps to 14.1%.

The two main growth drivers for Unilever in 2013 were home care and personal care, with underlying growth at 8% and 7.3%, respectively. Home care's improving business performance was driven by the increase in volume in fabric cleaners and fabric conditioners. Unilever's household-care business experienced double-digit growth in the fourth quarter, supported by the strong momentum of the dish-wash brands.

Furthermore, new product innovations, including Cif ultrafast sprays and Sunlight Power of 100 Lemons, also fueled the overall growth. In the personal-care business, the hair care, skin cleansing, and deodorants categories also enjoyed good growth with product innovations such as Dove Repair Expertise, Pepsodent Germicheck+ and Zhong Hua Porcelain White oral-care products, and Axe Apollo. 

In the long run, Unilever considered innovations to be the most important pillar for a sustainable competitive advantage. The company sets the goal that around 75% of all innovations will have higher Unilever average gross margin, to sustain competitive growth and up-trade its categories.

Procter & Gamble and Colgate-Palmolive also rely on innovation to drive growth
Procter & Gamble is also committed to continuous product innovation. In the third quarter, the personal-cleansing category experienced a 0.5-point increase in value share, driven by innovations in Olay, Old Spice, and Herbal Essence's body wash. Moreover, growth in Japan, Latin America, Eastern Europe, and Central Europe was led by product packaging and commercial innovations. Looking forward, the company will increase its budget in research and development spending to strengthen its near- and mid-term innovation pipeline.

In Colgate-Palmolive's business, innovation is also the key to increase share and category growth, especially with its leading toothbrush and toothpaste business. The recent launch of the Colgate Slim Soft Charcoal manual toothbrush has helped Colgate-Palmolive to drive market share in all markets. The company's Slim Soft variants reached double-digit market share in many countries, such as 20% in Hong Kong, 17.9% in Thailand, and 10.1% in Taiwan.

My Foolish take
Unilever really pleased its shareholders with the decent operating performance for the fourth quarter and for the full fiscal year 2013. With leading global positions, especially in emerging markets, and its ongoing product innovations, Unilever could continue to increase underlying sales and improve its core operating margin as well as profitability in the long run. At the current trading price, Unilever offer investors a quite sweet dividend yield at 3.7%, higher than the dividend yields of both Procter & Gamble at 3% and Colgate-Palmolive at 2.1%.


Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble and Unilever. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers