As summer turns to autumn, the leaves are turning in much of the world, and there is a chill in the air. But all that executives at Unilever are keen to talk about is ice cream.
The Anglo-Dutch consumer goods giant reported perky third-quarter results today (Oct. 15), thanks largely to bumper ice cream sales. The group comfortably beat market expectations for revenue growth in its latest quarter, recording the biggest rise in underlying sales in years.
Unilever’s “refreshment” unit, which includes the Magnum and Ben & Jerry’s ice cream brands, boosted sales by more than 8% in the third quarter. The soaps, shampoos, teas, detergents, and condiments that comprise the rest of the company’s sprawling product portfolio couldn’t match that growth.
Unilever’s shares are up by around 4% in London trading so far today. For a company of its size, the move is worth more than $5 billion in market value.
Has the world suddenly developed a sweet tooth? Not exactly. This summer in Europe was the hottest on record, particularly in the south, making for a “strong ice cream season,” in the company’s words. Meanwhile, in the US, a spate of recalls for listeria contamination at some of Unilever’s competitors in the ice cream freezer boosted its sales there.
And encouragingly for Unilever’s profit margins, the fastest growing ice cream brands were in “super premium” ranges, it said, where some brands experimented with new products. Turns out that people like it when you inject tubs of Ben & Jerry’s with cores of solid cookies or fudge. The company has also recently acquired artisanal gelato makers such as GROM in Italy and Talenti in the US, to capitalize on its customers’ growing taste for posh ice cream options.
But as the weather turns and many of Unilever’s customers don hats, gloves, and scarves, the company can’t rely as much on chilled treats to pace its growth. A sputtering global economy with persistently low inflation in advanced countries is making it tough for firms like Unilever to raise prices in its largest markets. At the same time, rapidly weakening currencies in emerging markets are eroding the gains from sales in these fast-growing countries.
Indeed, on a conference call with analysts, CFO Graeme Pitkethly took a distinctly cautious tone. “It’s fair to say that, in aggregate, we have not yet seen any improvement in our markets,” he said. “In fact, in a number of countries the economic environment is getting worse, with the situation on the ground dominated by the effects of currency depreciation.”