The Prudent Investor


How Unilever Makes Their Money
April 12, 2007, 7:30 am
Filed under: Consumer Goods

Next on the list, Market cap-wise, is Unilever. This is the first company I have examined for the Prudent Investor Portfolio that is not based in the United States.

Unilever was founded in 1930 following the merger of a company in the Netherlands and the U.K. To avoid punitive taxation levies, they pooled their interests through a business merger as opposed to a legal merger. Two controlling companies were established, Unilever PLC and Unilever NV. To be allowed to operate as a single legal entity, a series of agreements was put in place and the result is the Unilever company we know today. The current regional sales composition shows Europe 37%, The Americas 35%, and Asia Africa 27%.

The company is organized into two global divisions: foods and home and personal care, each one very roughly equal in size. The Foods division’s major brands are Knorr, Hellmann’s, Wishbone, Country Crock, SlimFast, Lipton, Breyers, Ben & Jerry’s, Klondike, and Popsicle. The Home and Personal Care division’s major brands include Snuggle, Surf, Dove, Pond’s, Suave, Lifebuoy, and Vaseline.

For this year Standard & Poor only sees a rise in revenues of 3%, which is not nearly the rate I would like to see going forward. Sales growth in Europe is especially sluggish. Their growing percentage of sales in developing & emerging markets does not offset the company’s below industry growth in developed markets. The stock price moved very strongly during the second half of last year, and could act as a weight looking forward.

This is not a positive overview of the company, and unless I encounter information to counteract what I have read, I will be removing the company from consideration.

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