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What Unilever just Said About Consumers Around the World: “It’s Really Tough out There”
Wolf Richter www.wolfstreet.com www.amazon.com/author/wolfrichter
What is it with these consumer-products companies that need to sell a lot of cheap stuff to a lot of consumers in a lot of countries? Over the last few days, one after the other reported what are more or less unvarnished quarterly revenue and earnings debacles.
At McDonald’s, global revenues fell 5% and net income plunged 30%. At Coca-Cola, international volume was up a measly 1%, but in the US, volume declined 1%. Revenues were down fractionally for the quarter and 2% year-to-date. Net income in the quarter dropped 14%. Revenues at third largest beer-giant Heineken, which brews its stuff in 70 countries, dropped 1.7%. People are scratching their heads: are consumers actually cutting back on beer? Other companies too have reported disappointing results.
On Thursday it was Unilever, the Anglo-Dutch giant maker of shampoos, deodorants, laundry detergents, ice cream… that warned in its quarterly report about what it looks like “out there,” not in the stock market, but in the real economy around the world.
“It is really tough out there,” said CFO Jean-Marc Huët. “We have been at pains to say that for a long period of time.” Consumers are in trouble and are cutting back across key markets, leaving the company with price pressures and crummy sales.
Revenues fell 2%. “Underlying sales,” which are adjusted for a variety of things, rose 2.1%, but it was the worst growth since Q4 of crisis-year 2009, and down from 3.8% in the prior quarter.
Unilever warned of a slowdown in all the right places, in the emerging markets, in Europe, and of stagnation in the US. Like other consumer-products companies, it complained about currency issues, political unrest, bleak economies, the wrong kind of weather, and other uncertainties that perplex consumers to no end and cause them to get stingy.
“We expect markets to remain tough…,” CEO Paul Polman said.
In the emerging markets overall, where nearly 60% of its revenues come from, underlying sales managed to increase 5.6%, down from 6.6% in the prior quarter, with Turkey, Indonesia, and the Philippines being particular bright spots. But Brazil is sliding into recession, Russia is slowing down as well, and China, oh my!
As China is entering its worst slowdown in many years, consumers are reacting by closing their wallets. Retailers and wholesalers are reacting to the newly prudent consumers by “de-stocking,” the company reported. The result was a “sharp slowdown.” Underlying sales plunged 20%!
Then there’s the problem in the developed markets: sales dropped 2.5%, while they were still growing fractionally in the prior quarter. In North America, sales inched up a barely visible 0.6%. And Europe – which had been fixed not long ago, based on the hype being propagated ceaselessly – has become unfixed again. Unilever bravely blamed “poor summer weather” across Europe for the lousy performance of its ice cream category. Whatever the reasons, sales dropped 4.3%.
“Europe is not around the corner by any means,” Huët admitted.
And after complaining about price pressures and outright “price deflation” in Europe – though overall prices went up, just not fast enough to doll up Unilever’s revenues – it then ironically reported the following about its entanglements in, well yes, price fixing allegations:
Unilever is involved in a number of ongoing investigations by national competition authorities. These proceedings and investigations are at various stages and concern a variety of product markets. Where appropriate, provisions are made and contingent liabilities disclosed in relation to such matters.
So how is Unilever grappling with these economic and weather-related issues? It’s introducing cheaper products, on the basis of shrinkflation. For example, it developed smaller ice cream cones that sell for €1 ($1.27) in Spain so that even newly impoverished, jobless, or underpaid Spaniards can buy one every now and then. CFO Huet explained it this way:
We’ve learned from the previous economic crises the importance of having such value brands in the portfolio that can capture some of the down-trading that inevitably happens when disposable income levels fall.
And that sums up the economic problems facing Unilever, Coca-Cola, McDonald’s, Heineken, and all the others: it’s an economic crisis for consumers who’re struggling with falling disposable incomes.
And then there’s the corporate response to all this: the requisite “savings program,” as Huët called it, “to apply all the levers to translate top line growth … into earnings per share.” Because that’s the only thing that matters.
So Unilever would cut expenses here and there, axe 1,400 people, and whittle down its exposure to pension costs, all of which will do wonders for the disposable incomes of those folks…. And that’s the vicious cycle of corporate cost cutting in response to strung-out consumers who’re cutting back because they’ve been hit with the consequences of corporate cost cutting.
In the US more than in most countries, it all boils down to consumers because the economy is so dependent on them. But they're too strung out, and now there's a problem. Read… The High Price of Free Money: Now US Bankers Fear Financial, Social, or Political ‘Instability’
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No- here are the tough numbers.http://netc.com/chart/view.php?n=5%3A811
All that american's need to do is keep thinking that the government will take care of everything and I better believe that or i'm a racist who lacks confidence.
Considering how we've getting screwed all this time, you'd figure their Vaseline brand would have generated record profits...
So...how's that recovery thing going? Oh, not so good, huh?
I ran some really rough numbers but based on what the CDC reports and California under reporting not withstanding ,
I believe we collectively aborted around eighty million potential consumers.
USA ! USA! USSA! USSR!
"The High Price of Free Money: Now US Bankers Fear Financial, Social, or Political ‘Instability’"
They created it.
It always ends the same way. Boom ends in bust. The bigger the boom, the bigger the bust. Greenspan and Bernanke doubled down on 1929.
Chuck Prince of Citi, said they needed to keep dancing while the music was still playing. But, the music always stopped and Chuck knew it would.
Almost two years ago during a television interview on Bloomberg, Harvard economist Steven Roach put a retail sales consultant in her place who was crowing about strong retail growth. Roach pointed out that after discounting for inflation growth in retail sales compared to past years is mostly an illusion.
I wish Roach had gone to the next step and pointed out that what little growth does exist is built on a foundation of demand from huge government deficit spending. To make things worse the government has been forced to borrow much of that money. The article below delves deeper into this subject.
http://brucewilds.blogspot.com/2014/09/consumers-are-facing-protracted-weakness.html
I'll take a stab at this. Put into words, what we all see.
In the late 80's early 90's, some USA businesses found they could make their products overseas, and lower the labor component. If you tried to compete, using local talent, you got crushed. So while it was distasteful, you also off shored, just to stay alive.
At what point did YOU realize that every fucking product you picked up had a hecho in Mexico, or Made in China label?
"They" say, the US is the 2nd largest manufacturer in the world behind China. Would someone tell me what the fuck it is that we manufacture?
Weapons? Aircraft carriers? 2 billion per copy bombers? WTF?
Now, we don't make shit. And I mean; underwear,shoes,tools,furniture,and a gazzilion other consumer products. Our houses are built by illegals ( trust me, they are) and everything else of any consequence is automated down to the janitor.
So if we get rid of .gov workers, where the fuck do the rest of us earn money to buy the shit that gets made for half price in another country?
What would Hank Ford do?
The most poisoned centrifuges in the field of consomers rapture are suffering a snub.
I tell it a snub compared with the coming and a blue view on the end of this.
Theoretically, along our inherited moral code: products which do not serve any good than to fill the pockets of the vendors are doomed from the beginning.
Pratically that process takes time in order to process history which goes, concernig the subjcet, to eliminate the sheeple dependent on adds and not on content.
It looks like a cold but the patient won't survive it.
Sell orders are adviced.
People still need toothpaste, shampoo and soap.
Uh-oh, looks like unileverage is finally biting them in the ass.
Unilever should just sell soap derivatives.
Well written but poorly grounded article.
The author would have us blame corporations for increased efficiency and lower prices? Nice dodge from putting the blame on monetary and economic policy as dictated by the unelected few who stand to gain the most by gaming the system they control.
WTF ZH?
Call them Bubbles
By the way what the heck happened with half and half, I used to pay 1.57 dollars about 8 months ago, now its 2.14 dollars. Good thing I am not on SS that 2 percent increase or whatever it was is not going to but it.
A dino can't get a decent bite anymore
https://www.academia.edu/8945501/Dinosaur_Death_by_Dwarfism
Interesting. Someone has a lot of time on their hands.
"It’s introducing cheaper products, on the basis of shrinkflation. For example, it developed smaller ice cream cones that sell for €1 ($1.27) in Spain so that even newly impoverished, jobless, or underpaid Spaniards can buy one every now and then."
Super nice of the execs there to think about the common person, hmm?
Mr. Wolf,
You lost me after the third time you called me a "consumer". That is a derogatory term and indicative of a shit business model. Fuck you very much Sir,,,
We can mark our collapse from when businesses stopped calling us customers and started calling us consumers!!!
Yes, we're customers, *customers* for the fodder they sell us!
Yup, proof positive that there is cooperation between big .gov, big .biz, and big .effingmedia to destroy the middle and create a two class society. The inner party and their minions, and the rest of us. Good luck with that...
And don't forget "civilian " . How your .gov sees you, taxdebt slave.
The beatings will continue, until moral improves.
World wide as governments increase in power over their economies, increase deficit spending, increase public debt, increase statutory and regulatory laws, and increase non working parasite populations, then economic decline is logical.
does unilever soap and shampoo stop the ebola virus? ebola christmas. shop at your own risk. "ebola puke clean up in aisle 9"...
i remember back in the early 80's when the govt said that cable prices would come down and they would break up the monopolies and keep us consumers safe from these telecom devils.
grandpa can't even afford cable anymore. millenials are dropping cable like its infected with ebola. next they will be dropping their zombie creating iphones and android phones.
sad when americans can't afford to live in america anymore, except for the imonkeys, illegals, and single mom walmart breeders living on uncle sams child support.
when are men going to wake up and realize that the war has been on them?
i'm mad as hell and im not going to take it anymore.
And government jobs....
I live on a cul-de-sac. I'm in the middle. Wifey is in ( and me by default, I suppose) the FSA. SSD, spent before it hits the account, nitwit.
To the right, husband and wife paid firefighters. Then a State Cop.
To the left, a schoolteacher. Then a gov attorney ( high level), then a couple consisting of retired teacher and Animal Cop.
So in my little peace of the world, 6 continuos households ( that I know of), would be up the creek in a barb wire canoe, if the .gov check stopped.
WTF?
20 years ago, carpenter, welder, auto repair, accountant, steelworker, car plant worker, steam fitter, and the list goes on. All making a steady, but modest income, PRODUCING value, and raising a family.
Replaced by a .gov check, that requires either taxing a producer, or deficit spending.
If you have a .gov job, or work for a company with . Gov contracts, you truly have lucked out, for the time being.
Me, I'm in construction. The illegals have destroyed the ability to make a living at it now. While at the same time, infusing the mini construction boom of houses and apartments with cheap labor.
Perhaps it's always been like this. I'm not 120 years old, and don't know. What I do know is, for me, with multiple skills that could only be dreamed by these young mangina types, it's getting hard to stay afloat.
We're fucked. Rant off.
No Pension...right there with you and in construction also. The illegals have completely turned the marketplace upside down. In certain trades you almost have to use them our your business is ruined. Cannot even do work at a loss and be guaranteed to land a job because they have a 20-30% price advantage if you run up against them. Waiting to see what impact this amnesty that is coming down the pike will have on the market. Will all the illegals come above board, expect a pay raise and start paying taxes or will they just continue to pay cash/get 1099'd and things continue as it is right now? If they come above board, things might improve for a while but if they do not close the border, more will stream across that are willing to work under the table and we will right back where we are now. I am not optimistic!
Fed.Gov HATES workers that work for a small businessman. The only thing they hate worse-much worse that ISIS or "Al-Queda"-is the dreaded terrorist Small Businessman. Fed.Gov wants control. Which means dependency.
It's harder to control millions of small businesses than a few huge corporations.
...and harder to extort campaign "contributions".
Stating the fucking OBVIOUS to those of us on a budget.
Nothing new here, move on.
Living frugally for many is the new "hip" thing.
Some by choice, some by necessity.
The message is clear : the "consumer" will no longer consume but retrench on do-it-yourself meals, like in grandmothers time. There's worse .... for us consumers, but surely NOT for the MULTI'S.
Preparing your own food from scratch ingredients and eating together with your family is the way it is supposed to be! Eating corporate gorp from a plastic tray, alone, is what used to called solitary confinement, a prison disciplinary tactic. y'all should join a commune or a church or other happy collective and share life's joy and beauty. Hearing others laugh is a great antidote to the cruel world the money masters' forces wish us to live in.
When the priority went from growing and improving the company to returning value to shareholders, the die was cast.
You can't serve 2 masters. A CEO should have as their FIRST responsibility the health and welfare of the company. Shareholders should profit when the company profits, and should not have the right to force a company to cannibalize itself to ensure payouts. Slow sales should mean smaller profits for everyone...it doesn't mean go fire 10,000 people so you can afford the dividend payout. It doesn't mean buy back your own stock to keep the price up...(THINK about that strategy a moment...if buyers are so scarce that they have to even USE this strategy, what difference does it make WHAT price it is? Who are they going to sell it to when they go to cash out anyway? Themselves again?)
Case in point Peabody Energy. In 2011 they repurchased $2 billion in stocks and borrowed $4 billion for an acquisition. Then coal prices started dropping even more and now they're in a canoe stuck up a shitcreek without a paddle. Over $400 million in interest expenses per year. A company that has been around for over 125 years old might go bankrupt because of share repurchases, which all the shareholders and analysts were cheering when it was announced. They're still paying out $90 million per year in dividends in order to prop up the stock price, which is still headed on a downward trajectory.
And think about this...if they didn't have to bleed so much money to the ticks, they might have been able to invest in technology to help their industry transition in these changing times. Coal may not be dead, it may just need a method of processing not thought of yet, or have some other, unimagined use...
Instead, they get sucked dry and discarded. Anything they've managed to accomplish gets liquidated and paid out to investors, who then move on, presumably, to some other company, to repeat, again and again.
But that company is toast, as are all the jobs that it generated. And the ideas and spirit that got it going in the first place. Their "value" extracted, and carted away.
Are these revenue and earning declines stated in nominal currency? Inflation is 10% so in real terms what does that mean? In terms of "stuff" people get related to the work they do to get it they are doing more work and getting less stuff or doing no work and getting no stuff. The global economic machine is shutting down because certain fundamental requirements for it to work are waning, things like the presence of real money, freedoms crushed by highly punative taxation and regulation, property rights reduced to feudal serfdom, morality and justice a joke. To me the economic machine is looking like a business going broke, slowly at first and then all of a sudden. The whole system is an Enron marching towards a reset.
"basis of shrinkflation"
I'd be intrigued to see that applied to condoms and feminine hygiene articles (which some have claimed to be good barter items)
Sounds all bullish to me.
Cut out the crap .
Let them worry for a change .
https://www.academia.edu/8942403/The_Hysterical_Focus_is_your_friend_
They make soap and ice cream? Interesting.
escape velocity postponed for another quarter
Ice cream huh... I'll have to pass.
Dove - it's 1/4 cleansing cream and ice cream!
Perfect for a shower or an after dinner treat!
New Shimmer...It's a floor wax AND a dessert topping!
Smart guy who pays attention to interesting things. I usually like to read his blog.
And people who are struggling do not buy name brands, they go generic.
Must be why someone robbed The Dollar Store last year.
"Europe is not around the corner, by any means"----in reference to an economic "recovery". Very revealing. they are definitely not around the corner but they're circling the drain hole.
"Europe is not around the corner, by any means"----in reference to an economic "recovery". Very revealing. they are definitely not around the corner but they're circling the drain hole.
That pesky deflation strikes again.