COVID-19 Impact on Unilever, H1 2020 Update

Summary

COVID-19 Impact on Unilever, H1 2020 Update June 26th, 2020 based on market analysis and brand diversification by industry and geography

While all companies in the consumer goods sector will see a major upheaval as a result of the disease, Unilever’s sales show a level of diversity in both product and regional terms that leaves it relatively well positioned to ride out the pandemic. A giant in the sector, it will potentially see a lot of sales lost at the retail level, but its implied 4.9% decline in brand sales in 2020 compared to what was predicted before COVID-19 is moderate compared to some. However, achieving this level of performance will require strong execution in food and household products, or a very strong performance in the latter relative to its competitors. It has advantages of scale and reach that may allow it to achieve this, if it reacts effectively to the crisis.

Scope

– Assuming its performance is in line with general trends, Unilever has $4.9bn of retail sales at risk due to COVID-19, but it will need to effectively target food and household goods, or dramatically out-perform the market in cosmetics and toiletries, to avoid a shaper fall
– Unilever’s diversification offers some level of relative resilience against the effects on brand sales
– Western Europe is relatively unaffected, but sector presence in key regions shows that billions in dollar sales are at risk
– Despite early positive signs, Unilever’s cosmetic and toiletries business is set to suffer from lockdown, social distancing, and home-working trends
– However, a lack of diversification in Unilever’s food business means that it should focus heavily on defensive strategies in its core areas
– Foodservice shutdowns and social distancing place beverage sales under pressure
– Household products offer a silver lining for the company

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