Unilever’s Resilient Start to 2025: Navigating Global Markets with Innovation and Operational Discipline

Unilever’s first-quarter 2025 results delivered a strong opening to the year, with underlying sales growth of 3.0%, surpassing market expectations and underscoring its ability to navigate macroeconomic headwinds. The growth was driven by a combination of strategic brand innovation, disciplined cost management, and targeted market interventions. However, challenges in emerging markets, particularly Latin America and China, highlight the need for sustained agility. Let’s dissect the key drivers, risks, and opportunities shaping Unilever’s trajectory.

Ask Aime: What factors contributed to Unilever's Q1 2025 sales growth?

The Engine of Growth: Premium Brands and Innovation

Unilever’s success in Q1 2025 hinged on its premium and innovation-led brands, which are increasingly becoming the backbone of its growth strategy.

• Beauty & Wellbeing: This segment grew by 4.1%, fueled by double-digit gains in Liquid I.V. (expanding into digital channels) and Nutrafol (venturing into skin care). Dove Hair Care, relaunched with fiber-repair technology, also delivered mid-single-digit growth. Meanwhile, acquisitions like K18 (a premium skincare brand) and Minimalist (clean beauty) added momentum.
• Personal Care: Led by Dove, which grew over 8%, this segment surged 5.1% thanks to its serum shower collection and Super Bowl campaign. New variants like Dove Men+Care’s premium naturals and Closeup’s whitening oral care in Asia also contributed.
• Ice Cream: The Magnum brand grew mid-single-digit, with its Utopia range and new Bon Bons in Europe. Yasso’s Poppables and Ben & Jerry’s oat-based innovations further amplified growth.

Regional Performance: Strength in Developed Markets, Challenges in Emerging Ones

While developed markets (42% of turnover) delivered a robust 4.5% growth, emerging markets lagged at 2.0%, constrained by macroeconomic pressures:

• Developed Markets: North America led with strong performances in Beauty & Wellbeing (Dove) and Personal Care, while Europe’s Home Care division thrived due to Persil Wonder Wash’s new variants. This marks the third consecutive quarter of USG above 4% in these markets.
• Emerging Markets:
• Latin America: Growth slowed to 1.5% as Brazil’s high real interest rates triggered retailer destocking.
• China: Underlying sales declined high-single-digit due to weak market conditions, though unilever expects improvements from H2 2025.
• Indonesia: Declined -6.6% as the company reset pricing and inventory, but recovery is anticipated by year-end.

Strategic Initiatives: Cost Discipline and Portfolio Restructuring

Unilever’s productivity program and portfolio moves are critical to sustaining growth:

1. Cost Savings: The company reduced 6,000 FTEs (toward a 7,500 target) and saved €550 million (vs. a €800 million goal), with restructuring costs now at 1.4% of turnover.
2. Ice Cream Spin-off: The planned demerger of The Magnum Ice Cream Company (targeted for late 2025) aims to unlock value by separating its premium ice cream business.
3. Acquisitions & Divestments: The purchase of Wild (premium personal care) and Minimalist (clean beauty) contrasts with the sale of The Vegetarian Butcher, signaling a shift toward high-margin, growth-focused categories.

The Outlook: Balancing Risks with Resilience

Unilever reaffirmed its 2025 outlook of 3-5% underlying sales growth, underpinned by:
- A modest margin improvement to 18.5-19% (vs. 18.4% in 2024), with balanced H1/H2 performance.
- Innovation momentum: Persil Wonder Wash, Magnum’s Utopia, and Hellmann’s Flavoured Mayo variants are key growth drivers.
- Emerging market turnarounds: China and Indonesia are projected to contribute positively from H2 2025.

Conclusion: A Steady Hand in Volatile Waters

Unilever’s Q1 2025 results reflect a company executing a clear strategy: leveraging premium brands, operational discipline, and portfolio agility to outperform in a challenging environment. With 3.0% growth exceeding expectations and a robust innovation pipeline, the firm is well-positioned to capitalize on its strengths.

However, risks remain. Emerging markets’ recoveries are critical to hitting the upper end of its 3-5% growth target, while currency fluctuations and consumer spending trends could test margins. That said, the productivity program’s progress, the Ice Cream spin-off’s potential, and its focus on high-margin categories (e.g., Wellness, Ice Cream) suggest Unilever is building a resilient foundation for long-term growth.

Investors should watch for H2 2025 performance in China and Indonesia, the success of its spin-off, and margin trends. With a 6.1% dividend hike and a €1.5 billion buyback, Unilever is also rewarding shareholders while investing in its future. For now, the balance of factors points to a hold recommendation, with upside potential if emerging markets rebound strongly.

In a sector where consistency is king, Unilever’s Q1 results reaffirm its status as a defensive yet growth-oriented play—a rare combination in today’s volatile markets.