Implementing Growth Action Plan at pace

Statement from Hein Schumacher, CEO

“Today’s results show an improving financial performance, with the return to volume growth and margins rebuilding. However, our competitiveness remains disappointing and overall performance needs to improve. We are working to address this by improving our execution to unlock Unilever’s full potential.

“In October, we set out a Growth Action Plan focused on three priorities: delivering higher-quality growth, stepping up productivity and simplicity, and adopting a strong performance focus.

“The new leadership team has embedded the action plan at pace. We have increased investment behind our 30 Power Brands, accelerated portfolio transformation, and are driving a sharper performance focus with clear and stretching targets across the whole organisation.

“We are at the early stages of this work and there is much to do but we are moving with speed and urgency to transform Unilever into a consistently higher performing business.”

Outlook

We expect underlying sales growth (USG) for 2024 to be within our multi-year range of 3% to 5%, with more balance between volume and price.

We anticipate a modest improvement in underlying operating margin for the full year. We will deliver this through gross margin expansion, driven by a step-up in productivity and net material inflation back to more normal levels.

Growth Action Plan update

In October 2023, we set out a Growth Action Plan to drive improved performance and competitiveness. During the fourth quarter, we moved at pace to embed it across the business.

The plan is divided into three elements but is underpinned by one simple premise: the need to do fewer things, better, with greater impact. The operational impacts will build throughout 2024.

Faster growth

1. Focus on 30 Power Brands: These gross margin accretive brands represented around 75% of Group turnover with underlying sales growth of 8.6% in 2023 and 6.5% in the fourth quarter. This is where we have concentrated our incremental brand and marketing investment, which will continue in 2024.

2. Drive unmissable brand superiority: We developed a new quantitative methodology to measure brands’ consumer appeal across multiple dimensions and have validated it in 29 strategic cells. During the first half of 2024, this will be rolled out across all 30 Power Brands in key geographies to identify performance gaps and improve competitiveness.

3. Scale multi-year innovation: We have identified multi-year, scalable innovation programmes to drive market development and premiumisation. The programmes at least double the average 2022 project size, with launches from 2025.

4. Increase brand investment and returns: In 2023, we reinvested more than half of our gross margin expansion into incremental brand and marketing investment, up 130bps to 14.3%. We will continue to step up investment in areas that drive impact and support improved competitiveness.

5. Selectively optimise the portfolio: We continue to reshape the portfolio, with the announced acquisitions of Yasso and K18 and the disposals of Elida Beauty, Dollar Shave Club and Suave.

Productivity & simplicity

6. Build back gross margin: We accelerated recovery in the second half of 2023 with a 330bps gross margin improvement, driving a 200bps improvement for the year to 42.2%. In 2024, a tight grip on costs, measured by improved net productivity, will fuel further gross margin expansion.

7. Focus our sustainability commitments: We are honing our sustainability efforts around four critical platforms: Climate, Plastic, Nature and Livelihoods. We have set exacting, short-term targets, to drive progress against our longer-term commitments.

8. Drive benefits of the organisation: The category-focused Business Groups are now fully implemented with end-to-end responsibility for strategy and performance. In 2024, this will enable sharper choices to accelerate growth and digitalisation.

Performance Culture

9. Renewed team: Since October, over half of our executive leadership team has changed. Our new leaders are addressing the 2024 opportunities and challenges with urgency and decisiveness.

We are announcing today that our Chief People & Transformation Officer Nitin Paranjpe has decided to retire from Unilever later this year. Nitin has had a distinguished 37-year career with Unilever, including as CEO of Hindustan Unilever, President Home Care, President Foods & Refreshment and Chief Operating Officer of Unilever. We are pleased to announce the appointment of Mairéad Nayager as our new Chief People Officer, effective 1 June. Mairéad is currently Chief Human Resources Officer (CHRO) of Haleon plc, having previously served as CHRO of Diageo plc between 2015 and 2022.

10. Drive and reward outperformance: We have implemented a new reward framework across the organisation with metrics more closely aligned to value creation. A new Directors' remuneration policy proposal has been extensively consulted on with our largest shareholders and will be voted on at the 2024 AGM.

Unilever overall performance

Underlying sales growth in the full year was 7.0%, with positive volumes of 0.2% and 6.8% from price. Growth from the 30 Power Brands was accretive at 8.6%. Beauty & Wellbeing and Personal Care delivered strong volume growth throughout the year and Home Care returned to positive volume growth in the second half. Volume growth for the Group accelerated to 1.8% in the fourth quarter, with 3.9% volume growth from the 30 Power Brands.

Underlying price growth decelerated from 10.7% in the first quarter to 2.8% in the fourth quarter, reflecting lower net material inflation in the second half. Nutrition and Ice Cream faced the highest input cost inflation in 2023 which translated into higher pricing.

The percentage of our business winning market share^[a] on a rolling 12-month basis was disappointing at 37%. This poor performance reflects share losses to private label in Europe, consumer shifts to super-premium segments in North America where we currently under index and a significant reduction of unprofitable SKUs globally. Our competitiveness is not good enough and we are moving quickly to address it.

Beauty & Wellbeing grew underlying sales by 8.3%, with strong volume growth of 4.4%. Prestige Beauty and Health & Wellbeing continued to grow double-digit and now account for a quarter of Beauty & Wellbeing’s turnover.

Personal Care grew underlying sales 8.9%, with 3.2% from volume and 5.5% from price, led by strong sales growth of Deodorants.

Home Care grew underlying sales 5.9%, driven by 6.8% from price and -0.9% from volume, with positive volumes in emerging markets offset by a double-digit decline in Europe.

Nutrition grew underlying sales 7.7%, with 10.1% from price and volumes down -2.2% as we responded to higher input costs and a challenging European market.

Ice Cream’s underlying sales growth was disappointing at 2.3%, with price growth of 8.8% and a volume decline of -6.0%, reflecting the impact of downtrading in the in-home channels.

Emerging markets (58% of Group turnover) grew underlying sales 8.5%, with 1.6% from volume and 6.9% from price. Latin America, Turkey and Africa delivered double-digit growth. India grew mid-single digit led by volume, with lower input costs that led to negative pricing in the fourth quarter. Sales in China grew low-single digit led by volume while the market recovery continued to be uneven and slower than expected. Growth in South East Asia was impacted by a sales decline in Indonesia in the fourth quarter as consumers avoided the brands of multinational companies in response to the geopolitical situation in the Middle East.

Underlying sales in developed markets (42% of Group turnover) grew 4.8% in the full year with 6.7% from price and -1.8% from volume. North America delivered strong growth of 5.8% with 2.5% from volume and 3.3% from price, with continued double-digit underlying sales growth in Prestige Beauty and Health & Wellbeing. Volume growth in North America accelerated throughout the year leading to volume growth of 6.3% in the fourth quarter. In Europe, underlying sales growth was 4.1%, driven by 12.8% from price given its higher exposure to categories with significant cost inflation, and a volume decline of -7.7%.

Turnover was €59.6 billion, down -0.8% versus the prior year, including -5.7% adverse foreign exchange translation and -1.7% from disposals net of acquisitions. Underlying operating profit was €9.9 billion, up 2.6% versus the prior year. Underlying operating margin increased 60bps to 16.7%. We improved gross margin by 200bps to 42.2% with an improvement of 330bps in the second half. We more than mitigated net material inflation of around €1.8 billion through improved productivity, price and mix while stepping up brand and marketing investment by €0.7 billion, a 130bps increase as a percentage of turnover. Overheads increased by 10bps, as we continued to invest in the expansion of our Prestige Beauty and Health & Wellbeing businesses.

Capital allocation

We continue to reshape the portfolio, allocating capital to premium segments through selective bolt-on acquisitions and divesting lower-growth businesses while balancing investment in the business and shareholder returns.

Adding to our portfolio of premium brands, we announced the acquisitions of Yasso Holdings, Inc., a premium frozen Greek yogurt brand in the United States, which completed on 1 August, and K18, a premium biotech hair care brand, which completed on 1 February 2024.

We announced three disposals during the year: the Suave beauty and personal care brand in North America, which completed on 1 May; Dollar Shave Club, which completed on 1 November; and Elida Beauty, which comprises more than 20 personal care brands. It is expected to complete by mid-2024.

In 2023, we returned €5.9 billion to shareholders through dividends and share buybacks. We completed the final two €750 million tranches of our €3 billion share buyback programme. The quarterly interim dividend for the Fourth Quarter is maintained at €0.4268.

Reflecting the Group’s continued strong cash generation, the Board has approved a share buyback programme of up to €1.5 billion to be conducted during 2024, which we expect to commence in the second quarter.

Beauty & Wellbeing (21% of Group turnover)

In Beauty & Wellbeing, we are focused on three key priorities that will drive the unmissable superiority of our brands: elevating our core Hair Care and Skin Care brands to increase premiumisation; fuelling the growth of Prestige Beauty and Health & Wellbeing with selective international expansion; and continuing to strengthen our beauty and wellbeing capabilities.

Beauty & Wellbeing delivered a strong full year performance, with underlying sales up 8.3%, balanced between price at 3.8% and volume at 4.4%. Volume growth accelerated through the year to 6.3% in the fourth quarter, with good volumes in Hair Care and very strong volumes in Health & Wellbeing.

The full year performance reflects continued strong growth in Prestige Beauty and Health & Wellbeing, which now account for a quarter of Beauty & Wellbeing’s turnover, as well as successful relaunches of some of our core Hair Care and Skin Care brands. The relaunches were powered by our science and technology capabilities and were supported by increased investment across our key markets to elevate their superiority credentials.

Hair Care grew mid-single digit through a combination of price and volume growth, with strong growth in Latin America and Turkey. Sunsilk delivered double-digit growth for the year following a successful relaunch of the brand. Clear delivered mid-single digit growth driven by breakthrough innovation – our first clinically proven anti-dandruff formula powered by niacinamide concentrate to repair and strengthen the scalp’s skin barrier. Following the successful relaunch in China last year, the mix has now been expanded to Thailand, Turkey and Brazil.

Core Skin Care grew low-single digit driven by price. Vaseline delivered double-digit growth, reaching €1 billion of turnover in 2023. Following the launch of our successful Gluta-Hya range in South East Asia two years ago, we further expanded the platform with the launch of serums and a Pro-Age range, tapping into a larger consumer pool by extending the patented technology to more products and new markets such as India. In North Asia, AHC declined double-digit as we reset the cross-border trade channel.

Our US-centric Prestige Beauty and Health & Wellbeing portfolios, built over several years through carefully selected bolt-on acquisitions, continued to grow ahead of the market delivering double-digit growth for the year. This was supported by strong performances from Hourglass, Dermalogica and Paula’s Choice which launched a Vitamin C range, using our core science and technology capabilities.

In Health & Wellbeing, Liquid I.V. and Nutrafol performed strongly. Liquid I.V. added sugar-free and kids variants to the range, without compromising flavour or function. The brand extended its presence outside of the United States for the first time with a successful launch in Canada, and further international roll-outs planned.

Underlying operating margin was flat with gross margin improvement reinvested in marketing and overheads.

Personal Care (23% of Group turnover)

In Personal Care, we are focused on winning with science-led brands that deliver unmissable superiority to our consumers across Deodorants, Skin Cleansing, and Oral Care. Our priorities include developing superior technology and multi-year innovation platforms, leveraging partnerships with our customers, and expanding into premium areas and digital channels.

Personal Care grew underlying sales 8.9% for the year, with growth balanced between price and volume, underpinned by continued strength in Deodorants. In the fourth quarter all three categories drove positive volumes.

Personal Care’s full year growth was led by its Power Brands and science-backed innovations. These innovations offer functional benefits but also deliver enhanced health, hygiene, and superior skin cleansing. Personal Care supported these innovations with a step-up in marketing investment, including strategic sponsorships such as our first sponsorship deal with FIFA.

Deodorants grew double-digit led by strong volume growth, particularly in Europe and Latin America. Rexona grew double-digit and its range of products with 72-hour sweat and odour protection technology is now in over 100 markets. Dove delivered double-digit growth with the successful launch of Dove Advanced Care for women and the launch of a new range of Dove Men+Care antiperspirant. Axe grew high-single digit following the launch of its new, long-lasting fine fragrance collection.

Skin Cleansing delivered mid-single digit growth with positive volumes. Lux grew double-digit driven by elevated skin care benefits in soap bars from its ProGlow technology. In the United States, Dove grew mid-single digit supported by its Body Wash relaunch with new packaging and 24-hour renewing MicroMoisture technology.

Oral Care grew mid-single digit led by price. Closeup grew double-digit and Pepsodent grew mid-single digit, having expanded its premium offerings in therapeutics and whitening.

The Dove Personal Care portfolio achieved double-digit growth with balanced price and volume growth.

Underlying operating margin increased by 60bps, driven by a strong gross margin improvement that was partly re-invested in increased brand and marketing investment.

Home Care (21% of Group turnover)

In Home Care, we focus on delivering for consumers who want superior products that are sustainable and great value. We drive growth through unmissable superiority in our biggest brands, in our key markets and across channels. We have a resilient business that spans price points and grows the market by premiumising and trading consumers up to additional benefits.

Home Care grew underlying sales 5.9% for the full year, with 6.8% from price and -0.9% from volume. Volumes were positive in the second half, with a sharp price growth deceleration in emerging markets reflecting commodity cost deflation.

In Home Care, we stepped up investments in brand and marketing and R&D to drive unmissable superiority of our biggest brands and deliver innovations that enhance the efficacy and sustainability of our products.

Fabric Cleaning grew mid-single digit for the year. This was led by high-single digit growth in Latin America where we launched OMO Branco Absoluto that restores the whiteness of clothes. South Asia delivered balanced high-single digit growth as we continued to develop the market by offering a full range of products to consumers, from entry-level products such as our Wheel laundry soap bar to mid-tier Rin, to premium Surf Excel liquid detergent. Growth in Europe was flat with double-digit price growth offset by volume declines.

We expanded plastic-free packaging for OMO capsules to more countries across Europe and drove premiumisation through next-generation innovation such as laundry sheets, a convenient and sustainable alternative to liquids and capsules.

We leveraged our cross-category science and technology platforms by using fragrance innovation from Beauty & Wellbeing in Fabric Enhancers where we launched Comfort Beauty Perfume in Vietnam. Fabric Enhancers delivered mid-single digit growth driven by price with low-single digit volume decline. Turkey continued to lead growth with double-digit price and volume growth.

Home & Hygiene grew mid-single digit led by strong growth in Latin America and South Asia which was partially offset by a decline in South East Asia. In the United Kingdom, we launched Domestos Power Foam – an unmissably superior innovation that is designed to spray upside down for improved cleaning performance as well as convenience. High store penetration and availability coupled with product superiority make this a blueprint for future roll-outs.

Underlying operating margin increased by 150bps driven by the strong gross margin improvement and a step-up in brand and marketing investment.

Nutrition (22% of Group turnover)

In Nutrition, our strategy is to deliver consistent, competitive growth by offering unmissably superior products through our biggest brands. We do this by reaching more consumers and focusing on top dishes and high consumption seasons to satisfy consumers’ preferences on taste, health and sustainability; while delivering productivity and resilience in our supply chain.

Nutrition grew underlying sales 7.7% for the year, with 10.1% from price and -2.2% from volume. Growth continued to be price-led as we responded to higher input costs of food ingredients. In the fourth quarter, we saw an improvement in volumes, with our two largest brands, Hellmann’s and Knorr, returning to positive volume growth.

Growth in Nutrition was driven primarily by Knorr and Hellmann’s, which together accounted for 60% of Nutrition’s turnover in 2023. We sharpened our focus on offering holistically superior products and unmissable marketing campaigns in key seasons, supported by increased marketing and R&D investment. Our business in Europe remained challenging as a result of continued cost inflation, the targeted exit of unprofitable SKUs, and private label share gains, impacting both volumes and profitability.

Scratch Cooking Aids grew high-single digit, led by Knorr, which achieved €5 billion in turnover in 2023. North America grew mid-single digit, supported by the ‘Knorr Taste Combos’ campaign and the launch of Knorr ready-to-eat snack pots which provide consumers with a nutritious meal while saving time. Latin America grew double-digit and Europe grew mid-single digit as we developed targeted campaigns to inspire healthier diets. Africa grew double-digit, supported by fortified products that help address malnutrition in the region.

Dressings grew double-digit driven by price. With strong foundations in taste, sustainable ingredients and recyclable bottles, Hellmann’s grew double-digit with positive volume driven by Latin America. The performance was helped by further roll-outs of our vegan and flavoured mayonnaise range. We stepped up brand marketing investment to target high consumption occasions such as Thanksgiving, Christmas or the summer BBQ season. 2023 was our third consecutive US Super Bowl ‘Make Taste, Not Waste’ campaign with nearly 10 billion earned media impressions and we partnered with the NBA in Brazil.

Unilever Food Solutions, now 20% of Nutrition’s sales, grew double-digit with positive volume and price growth driven by our strong presence in Europe, North America and North Asia. Our focus on customer service and digital selling has enabled us to serve more operators and improve productivity. As the foodservice market in China fully reopened, we grew double-digit, helped by market-making innovation such as extending Knorr bouillon to more flavours, tapping into evolving consumer preferences.

Functional Nutrition returned to growth while growing penetration and market share through its core proposition for kids as well as premium innovation tailored for women and people with diabetes.

Underlying operating margin increased by 100bps, driven by gross margin improvement which funded an increase in brand and marketing investment.

Ice Cream (13% of Group turnover)

Ice Cream grew underlying sales by 2.3%, with 8.8% from price and -6.0% from volume. Volumes were impacted throughout the year by high price elasticities with consumers downtrading to value formats and less favourable summer weather versus last year, mainly in Europe. In the fourth quarter, price growth slowed significantly after double-digit price growth in the first half of the year.

Ice Cream had a disappointing year with declining market share and profitability. We continued to invest behind our Power Brands, including Magnum and Cornetto, which generated almost 85% of the Business Group’s turnover. These brands remain well positioned to meet consumers’ desire for superior and indulgent ice cream. Emerging markets delivered mid-single digit growth, driven by a strong performance in Turkey. In the fourth quarter, we made additional investments in promotions, particularly in North America, to address competitiveness and volume decline.

In the full year, there was a marginal decline in In-home Ice Cream (around 60% of the business), with volumes down high-single digit broadly offset by pricing. Inflation remained high and private label gained share as consumers looked for value propositions in this discretionary category. In the United States, our Talenti brand expanded from pints into new formats with mini gelato and sorbetto bars.

Out-of-home Ice Cream (around 40% of the business) grew high-single digit, driven by strong pricing partially offset by some volume decline. Our limited-edition Magnum innovation, Starchaser and Sunlover, performed well and became Magnum's biggest ever innovation.

Underlying operating margin declined 90bps, driven by lower gross margin as a result of continued cost inflation and volume deleverage outstripping pricing, while brand and marketing investment increased.