OK, so Unilever's
In the past several quarters, well-known brands such as Dove, Lipton, and Bertolli failed to insulate Unilever from a recession that had consumers and retailers buying less of even the most basic items. That recession is likely still with us, but Unilever nonetheless managed to grow volume by an impressive 2%, and the company gained market share in products that comprise about 60% of its sales. Reported sales were up about 1%.
Underlying sales growth, which excludes the effects of currency and restructuring, was 4.1% -- lower than the prior quarter but a heap better than the negative results posted by the clearly ailing Procter & Gamble
Given that fellow global consumer-goods heavyweights P&G and Kraft
As for Kraft, which grew the second quarter's bottom line -- particularly favorable results compared with Unilever's 15% year-over-year profit decline -- its long-term growth prospects may be inferior. No, no, I don't believe that Unilever's Hellmann's Mayonnaise somehow trumps Kraft's Mac'n'Cheese; rather, it's all about each company's ability to tap new batches of consumers. And on that note, Kraft's exposure to developing markets, which is significant at roughly 19% of sales, is dwarfed by Unilever's, which gets a whopping 47% of its sales from the newly prosperous and emerging consumer.
Going forward, Unilever needs to prove that it can goose volume while at least holding margins steady. Encouragingly, management recognizes that there's a lot of work to be done on costs, and there's concrete evidence of progress: A 1 billion euro savings program is now 60% complete, and better working capital management produced a jump in cash flow for the quarter.
Of course, anxious investors can build their own consumer-staples giant: Shares of food maker ConAgra
Then again, Unilever's 2010 P/E is 13.5. No, that doesn't allow for a Smell The Glove-caliber misstep a la Spinal Tap, but it does seem to price in a good deal of the bottom-line risk.
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