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Unilever’s Q1 ’20 dismal result mirrors battered consumer goods sector

Consumer goods giant, Unilever has released its 2020 first-quarter report. Highlights from the result show that in its first quarter (January to March) the company printed a 30percent drop in revenue to 13.32billion in 2020 from N119.23 in 2019.

Revenue from its Food Products division tanked 19.5percent from N9.2 billion in the corresponding quarter in 2019 to N7.4 billion this quarter.

Revenue from its Home and Personal Care (HPC) division plummeted from N9.9 billion in Q1 of 2019 to N5.9 billion this quarter representing a massive 40percent drop.

Profits also went from N2 billion to N948 million a 52.6% decline year on year.

The makers of Close-Up toothpaste and OMO detergent saw marketing and distribution expenses surging to N2.32billion from N1.57billion as the company sees to regain market share amid intense competition from other brands in the market. Brand and marketing gulped N800million from N383.15million in first quarter 2019.

Read also: Unilever Nigeria records N13.3billion Revenue

In 2018, the company sold off its Spreads business which includes the household name brand Blueband Magarine.

Players in the consumer goods space are struggling to break even, the county’s tough operating environment, decrepit infrastructure sluggish economic growth and double digit inflation has shrink the wallet of most consumers in the country forcing them to seek cheaper alternatives in smaller, unlisted and most times smuggled brands.

Unilever is not the only platyer caught in this web, other giant such as PZ Cussons, Flour Millers and Brewers have seen their revenue come under intense pressure with no end in sight.

At the last NSE-CEO Consumer goods sector interactive session, which was organized by the Nigerian Stock Exchange to address the declining fortune in the sector, stakeholders suggested incentives such as tax incentives –to create long term and sustainable value creation in tax collections, consolidating efforts in the public-private partnership especially as regards infrastructure, with more emphasis on de-risking the consumer goods sector to drive down cost of production to improve margins of companies.

With an economic recession looming, food & beverage revenues are likely to come under pressure hence the need to revisit their sourcing strategies, rationalize their product ranges and assess the resilience and agility of their supply chains as well as their route-to-market channels.

E-commerce and distribution networks should be optimized and streamlined. considering the impact of changing commodity prices and other cost-to-serve as well as ways to increase demand, companies will be forced to revisit their pricing and promotion strategies.

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