Emerging markets lift global household goods firms

By Jessica Wohl

CHICAGO (BestGrowthStock) – Developing markets were critical for consumer product makers last quarter, as strong sales growth in countries like China helped drive profits while markets such as the United States remained somewhat sluggish.

Anglo-Dutch Unilever Group (ULVR.L: ) (UNc.AS: ) and U.S. manufacturers Procter & Gamble Co (PG.N: ) and Colgate-Palmolive Co (CL.N: ) all posted solid volume growth on Thursday, albeit based on easy comparisons with a year earlier, when consumers held back on spending.

Now they are bringing out new products and spending more on advertising to entice shoppers, while also trying to absorb rising commodity costs without resorting to big price hikes.

Unilever, which makes everything from Knorr soups to Dove soap, is seeing “green sprouts” of recovery, Chief Executive Paul Polman said. His company saw robust growth in emerging markets that offset stagnation in some developed regions, and its shares rose 3.3 percent in London.

P&G reported disappointing sales and forecast results for the current quarter below Wall Street estimates, sending its shares down almost 2 percent.

Analysts highlighted P&G’s biggest volume gain in 18 quarters, led by double-digit sales increases in emerging markets such as Brazil and Turkey.

But coupled with the weaker-than-expected dollar sales, the 7 percent rise in volume may point to heavier discounts as P&G tries to lure consumers in a halting economic recovery. P&G’s pricing was down 1 percent in the quarter.

“It’s pretty competitive out there,” said Morningstar analyst Lauren DeSanto. “It’s definitely more promotional than it has been in a long time.”

Colgate, which is about one-fifth the size of P&G, saw its profit fall as it took a hefty charge to account for hyper-inflation in Venezuela. Its sales also grew a bit less than expected and its shares rose 0.2 percent.

The results came as the U.S. Labor Department said on Thursday new applications for unemployment insurance fell slightly less than expected, implying only gradual improvement in the labor market.

Meanwhile, Mead Johnson Nutrition Co (MJN.N: ), the maker of Enfamil baby formula, topped expectations as strong sales in Asia and Latin America offset weakness in the United States. Cosmetics maker Revlon Inc (REV.N: ) said sales fell 4.7 percent in the United States but rose elsewhere.


The biggest players in consumer goods are focusing on new products this year to get shoppers’ attention, but risk over-promoting to gain volume at the expense of total sales.

P&G is placing its biggest bet in 30 years on new products like Gillette Fusion Pro-Glide razors and updated Pantene hair care, due to hit U.S. stores in June. Heavy discounts are common for such launches and could hurt sales growth, but P&G says it is confident that introducing products at a variety of prices and across dozens of countries will pay off.

Chairman and CEO Bob McDonald also signaled that P&G is working on expanding its healthcare portfolio, which includes brands such as Vicks, but did not give details on such plans.

Unilever’s new items include Dove for Men in Europe and North America and Magnum Gold ice cream heading to 28 markets. Colgate’s introductions include new Softsoap body washes.

Unilever cut prices recently to be competitive, but now expects prices to rise by the end of the year. Colgate’s pricing was flat in the quarter and should be up 0.5 percent to 1.5 percent in 2010, Chairman and CEO Ian Cook said.

P&G, which raised its dividend payout by 9.5 percent last week, said it will buy back about $6 billion worth of shares this year, up from its prior estimate of about $5 billion.

Colgate raised its dividend by 20 percent earlier this year and plans to repurchase about $1.8 billion to $2 billion of shares in 2010, Cook said.

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(Reporting by Jessica Wohl in Chicago and David Jones in London, editing by Dave Zimmerman, Gerald E. McCormick and Matthew Lewis)

Emerging markets lift global household goods firms