Unilever continues to double down on marketing spend in 2023

Unilever will continue to double down on marketing spend in 2023 after the FMCG giant upped spend by €500m. In a call helmed by Alan Jope, chief exec and Graeme Pitkethly, chief financial officer, the two said that more than 80% of that investment will be going directly into media. Media investment increased in the beauty and wellbeing, personal care and home care categories, despite high turnovers driven by price. 

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Another key area of investment was digital. Jope shared that Unilever invested in 29 leading edge digital marketing, media, and eCommerce hubs called DMCs. These DMCs comprise experts in media, data-driven marketing, content excellence and sales capabilities. “They will ensure that we deliver seamless consumer experiences and optimise our investment across all channels. And these DMCs represent a key investment to ensure that Unilever continues to win in this important channel of the future,” Jope said.

Jope added that priority digital commerce channels grew 23% in the full-year and currently represent 15% of Unilever's turnover. Unilever also saw faster growth in B2B and more modest growth in B2C as consumers in some markets returned to physical stores, “though often after searching online and purchasing offline,” explained Jope. 

“These channels are going to remain a key source of growth, and we're seeing rapid changes in the landscape as different channels, different models compete for consumers' attention and spend,” he added.

Jope added that Unilever’s growth is being underpinned by bigger, better innovation and a relentless focus on functional product superiority. “Brand investment was up significantly in absolute euros and will grow again in 2023. We will ensure that brand support remains at competitive levels in 2023,” he added.

A cautious win for the simpler structure

At the start of 2022, Unilever set out its intention to implement a new organisation and new operating model as the company moved away from its matrix structure. The units are organised around five distinct Business Groups: Beauty and Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream.

The new model went live on the 1 July 2023 with the objective of making Unilever simpler and faster, more focused in our categories and with greater impairment and accountability.

“The new business groups are now in place, and they're fully responsible for their portfolios from strategy all the way to monthly performance, which Pitkethly and I reviewed carefully,” said Jope. Moreover, Unilever business operations is now responsible for all transactional processes, technology and infrastructure that benefit from Unilever skill. “We call that the power of one,” said Jope.

Jope added that given that it is still early days for the new model, and the company is also cautious to avoid declaring victory too early. But the first six months have gone very well.

“We're already seeing benefits in the speed that decisions are being made out, sharper accountability for improving business performance,” he added.

Focus for 2023

Narrowing in on 2023, Unilever’s main priority remains to drive organic top-line growth. In the first half, it expects price growth to remain high from a combination of carryover pricing and in quarter price changes and volumes will remain negative.

“For the full-year, underlying sales growth will be at least in the upper half of our multi-year 3% to 5% range,” he added.

Market performance wise, Asia Pacific and Africa, grew by 10.3% in the year. In the fourth quarter, growth remained strong, driven by India, Southeast Asia and Africa. China declined due to the period of strict lockdowns, which impacted Unilever’s large China foodservice business in particular.

China declined by 1.3%, volumes down 2.2%, and that reflects basically the impact of the lockdown on both consumers and supply chains.

“The changes to the COVID policies came too late to have a major impact on 2022. And the first quarter will still reflect some disruption as life returns to normal,” said Jope. But Unilever still remains optimistic about the country, especially for the recovery of the out-of-home food business and its beauty categories.

Indonesia saw negative volumes as the company reset price and promotional strategies and reduced trade stocks in a number of categories across selected channels. The market context in Indonesia remains highly competitive. 

“Every one of our business groups is focusing attention on this very important market. And from a base of mid-single-digit growth in 2022, we are confident that performance will continue to improve in the coming year,” he said.

Overall, rural markets have broadly flat value terms with lower volumes. But India remains a key market for growth for the company.

Currently, nearly 60% of Unilever's turnover, some US$35 billion came from emerging markets, which together delivered growth of just over 11%. These markets remain a key source of competitive advantage and growth for Unilever and the business groups will continue to invest a further build strength and depth through 2023. The company saw particularly strong performances from Vietnam, the Philippines and Brazil.

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