The food and consumer products industry has increased prices
sharply on basic goods in recent years to make up for soaring input costs that
began with the pandemic and were exacerbated by Russia's invasion of Ukraine.
These hikes prompted a cost of living crisis in Europe and
the United States, and eventually pushed shoppers towards cheaper private label
brands owned by retailers like Carrefour, Tesco and Walmart.
Unilever's underlying price growth was 13.3% at its height
in the fourth quarter of 2022, with prices at its home care business up nearly
17% and prices at its ice cream business about 14% higher in that period.
Price hikes are easing, however, and Unilever, which owns
the Magnum and Persil brands, increased prices by only 5.8% in the third
quarter of 2023, Nielsen data showed.
P&G, Unilever's biggest rival in the household and
personal care category, on Tuesday cut its annual profit forecast on slowing
price hikes. Unilever reports full-year earnings on Feb. 8.
Investors and analysts, who warned that the prolonged hikes
could alienate shoppers in the long term, have called out Unilever's shrinking
market share for several quarters, raising concerns over growing private label
brands on conference calls.
From ice cream to mayonnaise and laundry detergent, Unilever
lost market share in the quarter, the data showed. In Europe, the company's
share of the ice cream category declined by 141 basis points in the month to
Dec. 3, while mayonnaise declined by 374 basis points.
Overall, Unilever's European market share in food fell by
160 basis points, while market share in household and personal goods fell by 52
basis points.
In the United States, Unilever's body wash business, which
includes Dove products, lost the most market share - down 510 basis points -
while deodorant brands such as Axe fell 310 basis points in the month to Dec.
2, Nielsen data showed. Household and personal goods in the U.S. fell 245 basis
points, while food fell only 20 basis points.
Unilever did not respond to a request for comment.
PRIVATE LABELS ON THE RISE
Nielsen data, much of which is gleaned from check out
registers at grocery stores, does not capture all retail channels.
The data, reviewed by Reuters, doesn't specify which
companies gained share, but private label food sales increased 16% in the two
years to March 2022 alone, reaching $135.5 billion at the time, according to
separate NielsenIQ figures.
Retailers with big private label brands have been busy
innovating and marketing since big consumer companies started raising prices,
particularly in Europe where they have been powerful for decades.
Unilever, like others in the industry, has also lost market
share because it has been cutting down on the variety of products it makes,
particularly in ice cream, using artificial intelligence and other tools to
help it decide which products to drop.
Companies have been doing so in order to focus innovation
and marketing on what they consider key brands. In Unilever's case, these are
14 key "billion-euro brands," including Dove.
When asked during a recent conference call about how
Unilever could regain market share from private label brands and other
competitors, Unilever chief executive Hein Schumacher said: "We're not in
the game of just simply stealing share. For us, priority number one is to make
the market and, therefore, to develop the market and enlarge the
categories."
In an earnings call in October, Barclays analyst Warren
Ackerman said Unilever's market share of 38% was "not good enough"
and that Unilever needed to be "close to 60%, to be top quartile in
staples".
Aviva fund manager Richard Saldanha said Unilever needs to
address categories where it is experiencing weaker growth.
"Schumacher has highlighted that winning market share
is an area where they are focused on delivering improvement," he said.
"This will inevitably take time in terms of turning this around, so
investor patience is certainly required."
Reuters