Meeting everyday needs of people everywhere - Unilever

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32 Unilever Annual Report on Form 20-F 1999 Report of the Directors Performance review by region and category – 1998 Ice cream and beverages Fl. million 1998 1998 1997 Change at current at constant at constant rates rates rates Turnover 14 593 14 987 14 198 6% Operating profit 1 144 1 171 1 092 7% Operating profit before exceptional items 1 312 1 340 1 340 0% Exceptional items (net) (168) (169) (248) Operating margin 7.8% 7.8% 7.7% Operating margin before exceptional items 9.0% 8.9% 9.4% Overall, underlying volume growth was flat in this product area. The progress we made in North America and Latin America was offset by Europe, following the effect of the poor summer on ice cream sales. Profits were also flat. Ice cream turnover rose by 4% in 1998. This is explained partly by price increases, due to higher raw material costs in North America, and to the acquisition of Kibon in Brazil. Our profits were lower, mainly in Europe. We had a good year in North America, where innovation and increased marketing investment helped regain our leadership of take-home packaged ice cream and maintain our lead in the impulse-buy ice cream sector. In Northern Europe, the poor summer hit our sales and profits, emphasising the need for us to encourage people to eat ice cream all year round. We rolled-out Winner Taco, an any-time ice cream snack, throughout Western Europe. Our focus continued on developing global brands, including new variants of the Magnum brand. We launched a global logo for ice cream, the heart-shaped ‘happiness’ design, as part of our strategy of increasing brand awareness among consumers around the world. The European Commission’s investigation into ice cream marketing in Ireland culminated in its decision declaring the practice of cabinet exclusivity contrary to Articles 85 and 86 of the Treaty of Rome, at least in the specific context of the Irish market. This decision was subsequently suspended by the European Court and we are vigorously appealing it. Since the end of 1998, we have amended distribution agreements in the United Kingdom to accommodate observations made by the Monopolies and Mergers Commission. In beverages, our business continued to develop a global tea portfolio and achieved a 4% rise in underlying volume growth, mainly in Latin America, Europe, and Africa and Middle East. Our overall margins also improved. In the United Kingdom, we completed the roll-out of PG Tips Pyramid tea bags, increasing market share. We also achieved strong growth in new markets, particularly in Egypt and Poland. Fruit-flavoured teas, relaunched as Lipton Sun Tea, continued to grow and we have now introduced them in 18 countries. In ready-to-drink tea, Lipton Brisk iced tea increased our market lead in North America and, in Southern Europe, the very hot summer helped increase our sales. Conversely, in Northern Europe the bad weather held back growth.
33 Unilever Annual Report on Form 20-F 1999 Report of the Directors Performance review by region and category – 1998 Culinary and frozen foods Fl. million 1998 1998 1997 Change at current at constant at constant rates rates rates Turnover 14 840 14 885 15 331 (3)% Operating profit 1 352 1 349 668 102% Operating profit before exceptional items 1 464 1 454 1 133 28% Exceptional items (net) (112) (105) (465) Operating margin 9.1% 9.1% 4.4% Operating margin before exceptional items 9.9% 9.8% 7.4% Our underlying volume growth was higher than 1997, principally in culinary which grew by 4%. Operating profits and margins improved significantly and we had notable gains in Europe and North America. Overall, our turnover declined by 3% largely due to disposals of businesses in Germany and the United Kingdom. In culinary, we had a good year with pasta sauces in North America, reflecting the continued success of our expanding Five Brothers and Ragú Cheese Creations! ranges. Tailoring mayonnaise to national or regional taste continued to prove successful. In France, Mayonnaise Gourmande sold well, with a place in the dairy cabinet reinforcing associations of freshness. In Italy, we relaunched Calvé yoghurt-based mayonnaise which proved particularly successful and has extended our market-leadership. Strong innovation enhanced the business’s stock and bouillon range. We launched a new liquid bouillon in Scandinavia under the Touch of Taste brand which was a particular success. In Latin America, restructuring of culinary operations continued and profits improved. In frozen foods, our overall volume was marginally below 1997, due to our continued portfolio rationalisation. H o w e v e r, profits were higher in We s t e rn Europe, particularly in the United Kingdom. In 1998, we successfully continued the development of individual products for local markets. Home care and professional cleaning Fl. million 1998 1998 1997 Change at current at constant at constant rates rates rates Turnover 19 422 20 228 19 350 5% Operating profit 1 848 1 916 1 528 25% Operating profit before exceptional items 1 983 2 046 1 711 20% Exceptional items (net) (135) (130) (183) Operating margin 9.5% 9.5% 7.9% Operating margin before exceptional items 10.2% 10.1% 8.8% Our home care and professional cleaning business made good progress overall, particularly in Western Europe and North America. We had both a better product mix and increased efficiencies meaning operating margins again rose, even after further marketing investment. Our laundry business achieved increases in both turnover and profits. In Europe, the convenience and quality of our new laundry tablets, backed by a substantial marketing programme, swiftly established our leadership in the European laundry tablets market. We also advanced our laundry market share in almost all developing and emerging markets. Household care maintained a trackrecord for labour-saving innovation with Domestos Active Toilet Gel, which we launched successfully in five European countries. We had other launches around the world, including Sunlight machine dish wash tablets in the United States and Cif/Jif extensions in Latin America and Europe. DiverseyLever‘s second full trading year since we merged Lever Industrial International with Diversey was somewhat disappointing with underlying volume flat in 1998. We had reasonable results in Southern Europe, the United Kingdom and North America, but we experienced difficulties in other parts of Western Europe and the Far East. In May 1998, we bought Michigan-based cleaning and hygiene business AmeriClean Systems, which became part of DiverseyLever.
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Meeting everyday needs of people everywhere - Unilever

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