• by Sarah Mahoney  @mahoney_sarah, February 13, 2025

If Unilever’s latest quarterly report is a harbinger of what CPG companies are up against in the coming months, marketers should brace themselves. Despite an increase of nearly $1 billion in its marketing budgets, Unilever’s annual sales fell short of forecast, rising 4.2% to $63.4 billion. On a volume basis, sales gained just 2.9%.

More concerningly, the company said that this year has gotten off to a slow start, leading to a lowered sales forecast of between 3% and 5% in the year ahead. And after failing to attract a buyer for its ice cream division, Unilever announced plans to continue with the de-merger of its ice cream division, with the spun-off company to be headquartered in Amsterdam.

Unilever’s stock’s price declined as much as 7% in the aftermath.

The softness was worst in food. Consumers are under spending pressure, with more abandoning branded products in favor of private-label options.

“That guidance has spoilt the party and reminded investors that Unilever is still at the mercy of the global economy and consumers’ ability and willingness to splash the cash,” says AJ Bell analyst Russ Mould in a Fortune report.

The company continues to roll out its sweeping Growth Action Plan introduced in 2023. That strategy called for a renewed focus on “fewer, bigger innovations” in power brands, the 30 names that generate 75% of sales. That includes such brands as Dove, Vaseline and Liquid I.V.

Unilever backed that strategic shift by increasing the marketing budget by $937 million last year, all for those power brands. On a two-year basis, that makes a $1.65 billion jump in marketing spending. Marketing investments now account for 15.5% of sales, compared to 14.3% in 2023. That’s the highest in a decade.

Still, that marketing spending is having less of an impact on sales. “Market growth, which slowed throughout 2024, is expected to remain soft in the first half of 2025,” said Hein Schumacher, CEO, in the announcement. “We anticipate a slower start to 2025 with subdued market growth in the near term. We expect the market and our growth to improve during the year as price increases, reflecting higher commodity costs in 2025.”

The company also revealed more details about the dispiriting choice to de-merge its ice cream division, which generated sales of more than $8.6 billion last year, or roughly 14% of Unilever’s overall revenue. That division “has in recent years posed big challenges for Unilever,” writes the Wall Street Journal. “Ben & Jerry’s, once regarded by analysts as one of the jewels in Unilever’s crown, has turned into something of a problem for its parent company. The brand, which has an independent board thanks to an unusual arrangement struck when it was acquired, has repeatedly butted heads with Unilever.”

Those have resulted in two separate lawsuits.

And the division is likely to be under further pressure from higher commodity prices.

Unilever saw sales gains in all segments, with beauty and wellness showing the most strength, up 6.5%, with volume growth of 5.1%. With rising demand for deodorants, personal care gained 5.2%. Home care rose 2.9%. And while foods grew underlying sales by 2.6%, that division saw a gain of just 0.2% in volume, which Unilever attributes to a market slowdown and moderating prices.

Other food companies, including Kraft Heinz and Nestle, are noting similar trends.

“Consistency is not about one good year,”  Schumacher said on the earnings call. “We know there is a lot still to do and some way yet to travel – and in somewhat turbulent waters.”

Investors are overreacting to Unilever’s news, writes Diana Radu, who follows the company for Morningstar. “Market weakness in the first half of 2025 is likely to be offset during the year, given Unilever's continued efforts to improve the effectiveness of its innovation and marketing and a slightly higher price contribution.”