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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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Lever has that covered!
http://www.suave.com/product/detail/671220/2-in-1-anti-dandruff-classic-clean-shampoo-conditioner
LOL next thing they will say 4 in 1 adding it as substitute for engine oil detergent and fuel injector cleaner
The .gov speak in the '70's was "stagflation"; prices went up but your income didn't. hence the confusion; also, hence the contraction in the retail economy; which is not good, as far as I can see; unless there's some magic way this makes a "recovery". I doubt it; but what do I know? very little.
Another reason for the influx of new consumers aka illegal immigrants. They might not have much money, but they still need food, clothing, and shelter. The rest will come from government. The middle class is no longer needed.
Consumer goods products but no consumer money?
Yeah,, that could be a problem.
I am sure WS Banksters with million dollar bonuses will chip in for TP and grizzle dogs for the kids.
These are "luxury goods" not "consumer goods." Consumers are doing just fine...
I believe this is why we have such unending political pressure to increase population: the multi-nationals need as many consumers as they can possibly get.
can't be right. consumer doesn't equal population. consumer equals population with money to spend. you want to open a store in Bangaladesh, (sp.) ? there's plenty of population there.
Everyone has to eat. Somebody in Bangladesh is making lots of money.
Look to the slums in Bangladesh and Mexico for America's future. Those in power have no greater desire than to destroy the middle class and replace them with serfs. The future consists of three classes:
1) The 0.1% ruling class who are the Warren Buffet and Bill Gates types along with powerful politicians
2) Government employees to keep the suffering masses under control
3) The suffering masses
Top 10 richest men in Bangladesh: http://www.worldsrichpeople.com/richest-man-in-bangladesh.html
Did anyone notice that the richest people on that list are 'Politically' conected?
Probably funneled U.S. foreign aid money to themselves through the usual political graft and curruption, and are now considered respectable and legit.
Ron Paul is right.. ".. foreign aid is taking money from poor people in this country and giving it to rich people in poor countries."
top 10 rich in bangladesh: from the blog it seems most held .gov positions or family long in .gov now they are worth billions, Bill and Hillary must be blue with envy. (bush's got it licked in growing family wealth)
And the vote Great. We must have the votes!
No disposable income and all will go down the toilet. We ain't seen nothing yet.
Proctor and Gamble has disastrous top and bottom line and the markets are up on the "good" news
I don't see how Unilever could be called a maker of ice-cream considering the ingredients used in the product.
Unilever should run with this:
https://screen.yahoo.com/shimmer-floor-wax-000000185.html
"It's a desert-topping!"
"No, it's a floor wax!"
"It's both!"
What a great bit that was!
Brings back memories of when SNL was great
Those sprinkles are paint chips.
Enjoy.
Granulated particle board with artificial flavoring
William, that sounds appetizing in comparison to "Pink slime", aka hamburgers......
The coporate euphemisms to describe the 'shrinksizing' of their products while keeing the cost the same or up slightly is fascinating.
Snickers calls their new tiny downsized bar the "Fun Size" for example, as if you're supposed to enjoy paying double the old price for half the ounces.
The Wendy's ice cream cup is another great example of a product that screams, "Fuck You!" to the broke consumer. If those $1 'value softies' at Wendy's get any smaller they'll need to simply pass a teaspoon of their ice cream out the window to you.
Unilever is one of the first truly large multi-national corporations ( read: Facists Without Borders).
Two phenomena accelerating like freight trains at one another-
The global dervative sink is sucking up ALL capital out there as collateral;
The second is -no more cheap energy; all available energy is presently being used to support the core structures of society
Ugly is coming down fast -its a race as to whether the banks blow out before/after the rest
Gee, when you know the consumer is tapped out and cutting back, why would any producer try to keep growing when it will ultimately kill their business?
Thank God that businesses only exist these days in order to keep the engines of financialization firing, rather than focusing on their core competencies of providing consumers with value. Or should I say, "Thank Greenspan!"?
But..but..but ..PENT UP DEMAND!!!!
A few billion people stopped buying soap. Just take a dip in the ganges. Try not to notice the rotting corpses and feces floating by.
In China, when 6000 dead pigs floated through the drinking water supply, water quality was "unchanged". Same thing.
Yup, it isn't rocket science is it? In an economy where consumption is 70% of GDP, that GDP can only grow when consumption increases. Not likely when such a large proprtion of the labor force is idle and the ones who are working have falling net real disposable income.
It’s all that cash just “sitting on the sidelines” doing nothing I read somewhere ….
Correct. All that cash is owned by the 1% and most of it is parked in The Cayman Islands and The Virgin Islands where it is, well, gaetting a tan I suppose?