Finanzas: A Lesson On Innovation In Today’s Consumer Goods Industry


Unilever focuses on growth while P&G counts on divestitures, brand consolidation and cost cutting.

Innovation in the consumer goods industry has become more challenging, but is still possible.


Unilever’s recent acquisitions illustrate the company’s strategy to foster growth in developed markets.

Procter & Gamble (NYSE:PG) and Unilever (NYSE:UL)(NYSE:UN) both belong to the leading global consumer goods companies. One of the two has delivered stable growth whereas the other had to report decreasing sales for some time now.

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I guess everybody knows which one is trailing, and admittedly, the strengthening dollar became a severe headwind for P&G in the last couple of years which negatively impacted top and bottom line. There are signs that this effect starts to wear off, and P&G’s recent first quarter results might be a hint for it.

Nevertheless, even if currency fluctuations and M&A effects are eliminated, Unilever’s organic sales growth is higher than P&G’s. The strong emerging market presence used to be Unilever’s primary growth driver, and although the pace slowed down even in countries like Brazil or China, it is still comparatively easy for global consumer goods companies to grow in regions where emerging middle classes demand more and more of their products.

P&G ended FY16 (until June 30) with an organic sales decline of one percent. This compares to one percent growth in FY15. Unilever reported an underlying sales growth of 4.7% in 1HY16 (which ended on June 30) after 4.1% in FY15 and 2.9% in FY14.

If we look at the major news in the past couple of years, P&G leaves the impression that the company’s focus has become an internal one. To start with, the consolidation of the number of brands from 170 to 65 sounds like a major endeavor which requires a lot of resources. While I do not think that product consolidation and complexity reduction in a reasonable scope are the wrong things to do, I miss a clear commitment to innovation, and I cannot see new ideas which might foster growth.

Fuente: Seeking Alpha

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