It’s quite tough in the Champion’s League of consumer goods companies at the moment as the likes of Unilever, Procter & Gamble, Colgate-Palmolive and Reckitt Benckiser struggle with higher input prices and price-conscious consumers, particular in stagnating Western Europe.
Anglo-Dutch Unilever, headed by Paul Pohlman (left), is top of the group at this stage, increasing sales growth in the third quarter by 5.9 per cent to €13.4bn ($17.3bn), way ahead of its rivals. Margins remain under pressure however, particularly in its (usually) high margin food business (which includes brands like Flora) where it has had to cut prices.
In contrast US-based giant Procter & Gamble saw its revenues fall four per cent in the third quarter to $20.7bn (€15.8bn) as embattled CEO Bob McDonald concentrates on cutting costs in search of those elusive higher margins. McDonald, though, said his strategy remains on track although not everyone is convinced. Veteran investor Warren Buffet of investment giant Berkshire Hathaway cut his P&G stake.
At this rate Unilever could overtake P&G in the forseeable future, which would be a rather volcanic turn-up.
The implications of all this for the two giants’ creative and media agencies seem pretty clear. Both will continue to invests heavily in advertising and marketing, particularly if the race for top spot becomes tighter. P&G, for all its emphasis on cost-cutting, won’t want to run second to Unilever. Unilever would love to be first, although it would doubtless deny this officially.
But emphasis on costs and margins at both companies will mean they will try to squeeze their agencies, along with other suppliers, harder. Unilever has just completed a global media review, deciding to stay with WPP’s Mindshare and Omnicom’s PHD: presumably, at rather lower rates.