UK – Consumer-goods giant Unilever is set to address challenges faced by its ice-cream business following a lackluster performance in 2023, according to the company’s announcement today.

The ice-cream segment, constituting 13% of the group turnover, generated €7.9 billion (US$8.5 billion) in revenue for 2023, reflecting a modest 0.5% increase compared to 2022.

Despite a 2.3% increase in underlying sales growth (USG), the volume of ice-cream sales dropped by 6% last year. Unilever’s fourth-quarter results reported a 0.2% decline in ice-cream turnover and a 0.4% decrease in USG, with volumes dipping by 0.8%.

The underlying operating margin for the ice-cream category saw a drop of 90 basis points to 10.8%, attributed to low gross margin resulting from cost inflation and volume deleverage exceeding pricing.

Unilever’s CEO, Hein Schumacher, acknowledged the disappointing performance, citing significant consumer downtrading to private-label products as a key factor. In-home ice cream, constituting 60% of the category, experienced a high-single-digit drop in volumes offset by pricing.

Out-of-home ice cream products saw high-single-digit growth with strong pricing, partially offset by volume decline.

Magnum and Cornetto ice creams, core power brands for Unilever, contributed nearly 85% of the ice-cream unit’s turnover in 2023.

The company plans to focus resources on these brands, considering them well-positioned to meet consumer desires for superior and indulgent ice cream.

To address the weak performance, Unilever CFO Fernando Fernandez outlined actions, including a sharpened pricing and promotional strategy in the United States.

Meanwhile, the company has undergone restructuring in the ice-cream team, replacing 80% of country and regional leaders, and forming a new leadership team led by Peter ter Kulve, with a focus on improving operational grip and productivity.

While responding to questions about downtrading in the U.S., Schumacher emphasized the different dynamics of the market and highlighted Unilever’s efforts in promotional intensity to address competitiveness.

He expressed optimism that volumes would turn positive in North America in the fourth quarter.

Fernandez acknowledged the need for competitive pricing in the ice-cream sector but stressed that certain ingredients like cocoa and sugar remain inflationary.

Unilever’s overall group annual turnover reached €59.6 million, down 0.8% year-on-year, prompting Fernandez to label the level of competitiveness as “unacceptable.”

Operating profit declined 9.3% to €9.8 billion, with the operating margin dropping by 150 basis points to 16.4%.

In addition to ice cream, Unilever’s nutrition business also faced challenges from input-cost inflation, resulting in a 5% drop in revenue for 2023, primarily impacted in Europe by cost inflation, SKU exits, and private label share gains.

 

 

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