Monday, February 17, 2020

The Bitter and Sweet of Unilever’s New F&B Policy

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What’s happening: Leading FMCG (fast moving consumer goods) company Unilever has announced plans to update its marketing policy for children under the age of 12.

What happened: Unilever said it will now stop marketing and advertising products to children below 12 in traditional media, and under the age of 13 on social media, to allow parents to select products on their own for their children. The initiative, led by the company’s ice cream business, comes amid steep declines in total revenues over the past two years.

The new approach to Unilever’s marketing communication to children has been driven by the growing risk of obesity globally. As part of the initiative Wall’s packaging will now display “Responsibly made for kids,” which incorporates the company’s principles of “Responsibly Communicated,” “Responsibly Developed” and “Responsibly Sold.”

Unilever said its new marketing communication will be directed towards parents, who are the real decision makers. The Netherlands-based consumer goods giant believes that the “Responsibly made for kids” display on its product packaging will make parents feel satisfied that the item was made keeping the health of their kids in mind.

The initiative is not limited to a change in communication, as Wall’s leading products, the Feast and Twister ice creams, will have less than 110 calories and not more than 12g of sugar per serving by the end of 2020.

Unilever also announced plans to not use any sponsors or celebrities that target children under 12 years of age and would limit the use of cartoon characters to only point-of-sale communication.

Why it matters: Unilever’s total revenue has declined from over $60.32 billion in 2017 to $58.22 billion in 2019 mainly due to a decline in Foods & Refreshments sales. The company hopes that its latest initiatives would help drive growth in the coming years and enable total revenue to cross the $60 billion mark in 2021.

The Foods & Refreshments unit is expected to generate revenues of $22.25 billion this year, contributing around 37% of the company’s total revenue. The unit’s revenues are expected to grow to $1.32 billion over the next couple of years.

Unilever has been taking several steps to create a brand image that is more appealing to today’s health and environment conscious consumers. Among other moves, the FMCG giant said that its Suave brand had achieved the “cruelty-free” accreditation from PETA (People for the Ethical Treatment of Animals). Suave’s packaging will soon be carrying the “cruelty-free” insignia.

In an effort to boost profitability, Unilever has also indicated that it has begun the process of evaluating its health and beauty business to offload underperforming brands.

What to Watch: Investors will look for signs of how the latest initiative impacts Unilever’s sales, as the under-12 age group represents a whopping 25% of the company’s target market.

The Markets Today

     

Investors will be watching Bitcoin, amid growing coronavirus fears, a possible slowdown in global economic growth and political uncertainty in the UK and EU.​​

Context: Bitcoin dipped to below the $10,000 mark over the weekend, after having surged from around $7,200 at the beginning of the year. The benchmark cryptocurrency has been in focus as investors seek “safe haven” options amid the economic impact of the coronavirus outbreak. The coin is also considered as a hedging tool against geopolitical risks.

Details: Early last week, Bitcoin rose above $10,000, reaching a 5-digit figure for the first time since September. By Wednesday, the leading cryptocurrency was trading above $10,330. This marks a significant rise not only from December 2019, when the coin reached below $6,700, but also from below $3,200 reached in December 2018.

Why it matters: The sell-off over the weekend came after Bitcoin traded above $10,300 for an extended period and may have been driven by profit taking rather than bearish sentiment.

Some analysts note the bear case for Bitcoin as investors prefer the US dollar and precious metals as “safe haven” assets. The greenback has been strong this year, up 3.5% against the euro year to date. The US dollar index has gained 2.84% year to date. Gold gained around 1% last week, with silver also ending the week higher.

Analysts who are bullish about Bitcoin highlight that the greenback has been supported by the highly positive earnings season among US stocks, most economic data indicating resilience in the world’s largest economy and expectations of interest rate cuts by the Fed to counter the impact of the coronavirus on the US economy.

Bitcoin trading has been on the rise this year, with exchanges offering state-of-the-art technology, built-in fiat gateways, faster KYC verification and deeper order books, which reduces spread and slippage. Moreover, trader response has also become increasingly premeditated rather than being driven by sentiments like FOMO and anxiety.

What to watch: Investors will closely monitor the impact of China's coronavirus on the global economy. Any news of a rise in coronavirus toll and confirmed cases may support Bitcoin. Traders may take cues from the Fed and EBC minutes, scheduled to be aired later this week, for further insight into the economies. For Bitcoin, $9,700 is considered as a key support level.

Other Markets: US indices closed mixed on Friday, with the Dow down 0.09%, while the S&P 500 rose 0.18% and the Nasdaq gained 0.20%, respectively.

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What else to watch today

     

Russian industrial production and speech from European Central Bank’s Philip Lane.