Unilever hit by discounting in Asia
the Asia Pacific region during the first half of the year, as
overall results are dragged down by even worse performances in the
European and North American markets. The company said that some
sales growth in the Asia Pacific region had been sustained through
continuing success of its leading food brands, though discounting
had hit profits.
Group operating profit before exceptionals dropped 2 per cent to €1.613 billion, missing targets by nearly €60 million for the first six months of the year. In the core European market sales were down 6 per cent, whilst results in the Asia Pacific region registered a one per cent drop in turnover, down from €3,444 million in 2003 to €3,471 million in 2004. Although Unilever did report sales growth for many of its core brands, the company did acknowledge that profits for Best Foods Asia Pacific had been hit by discounting. The price of core brands had to be cut in an effort to remain competitive and not lose all-important market share, the company explained. This contributed to profits before exceptional items falling 9 per cent in the region, to €464 million. In the core European market profits fell 10 per cent to €1,348 million.
In the Asia Pacific region underlying sales grew by 0.7 per cent in the second quarter, down from first quarters growth of 1.8 per cent. Meanwhile volume growth was 3.1 per cent, the same figure as the previous quarter.
In the first quarter the company reported growth of leading brands, particularly through Royco, Bango and Sariwangi in Indonesia, Brooke Bond tea in India and through Knorr. In the second quarter the company said that further growth for the Knorr brand in China and South East Asia, where good growth was also reported for the Lipton brand and ice cream.
Following a disappointing financial year in 2003, Unilever says it will no longer pursue its strategy that aims to grow its leading brands by a steady five to six per cent. Instead the company said that it would no longer continue to concentrate on this mainstay of its business. Instead it is now concentrating on generating more value for its shareholders by concentrating its focus on share buy-backs and cash generation.
Unilever Bestfoods Asia was formed in July 2001 following the roll out of the two Unilever divisions - Unilever Bestfoods and Home and Personal Care - to Asia and the resultant disolution of the East Asia Pacific and Central Asia and China business groups.
Unilever Bestfoods Asia is headquartered in Singapore. The business group is organised throughfour regional clusters - North East Asia (including China, Hong Kong, Japan, Korea and Taiwan); South East Asia (Thailand, Malaysia, Singapore, Indonesia, Philippines and Vietnam); Central Asia (India); and Australasia (Australia and New Zealand).
