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Unilever N.V. (ADR) (UN) – Consumer Goods: Information You Must Know

Published on July 1, 2013 at 12:20 pm by The Motley Fool in News

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Unilever plc (ADR) (NYSE:UL) As an investor in the consumer goods space, I learn there is nothing more relevant for consumer goods companies (CGC) than market share. As CGC businesses are based on distribution, their fixed costs per unit of volume that they sell goes down sharply as they gain market share. Here I post an updated market share trend review for three of the most relevant consumer goods companies in the world.

Ameliorating the troublesome food category

Nestlé, my favorite international CGC, is improving sales growth in the US as market shares have also generally improved. Despite investments made in frozen foods, however, food prices continue to be a drag on overall sales growth.

Even when food remains the company’s weakest pricing area (largely as a function of an increasingly commoditised business), some food categories have begun to improve pricing with frozen food and pizza recording 1.4% and 0.4% price-mix respectively in June. As a matter of fact, other categories remain strong. For instance, baby food and infant formula have continued to be the primary source of sales growth with robust double-digit year-over-year (yoy) growth rates of +13% and +34 % respectively.

This CGC giant, trading at 2014 15.8 times its price-to-earnings ratio and paying a 4% cash dividend yield, remains my favorite despite its troublesome food business.

This beauty products company continues to be increasingly attractive

L’Oreal has strongly kept gaining market share driven by an outstanding performance in hair care as a function of the successful launch of L’Oreal Paris-Advance Haircare. Market share gains in shampoo (+1.70%) and conditioner (+1.74%) have helped underpin group share gains of 0.70% in the US market.

Outgrowing its categories, L’Oreal continues to surprise on the positive side. In fact, management reported a 6.3% organic growth during the first quarter, continuing the healthy trend seen last year (+7%).

Trading at 2014 21 times its price-to-earnings ratio and paying a 2.2% cash dividend yield, L’Oreal is the ultimate champion in the beauty industry.

A giant under pressure

Unilever N.V. (ADR) (NYSE:UN) is resisting pressures from many fronts. The giant’s sales growth slowed all along 2012 and the first quarter of this year due to weakness in the food business, partially offset by good growth in its home & personal care (HPC) sales. Unluckily for Unilever N.V. (ADR) (NYSE:UN)’s investors, this trend has been maintained throughout the second quarter with food sales continuing to decline by -6.5% as the category growth weakens by only -0.3%. Hence, this CGC giant is losing overall share in the US (0.75%) with food categories as the main culprits. The bad news does not end there, as the HPC business is growing below the two-year trend.

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NYSE:UN Unilever N V (UN)