Unilever Prepares For The Summer With New Frozen Products

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UL: Unilever logo
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Unilever

Global consumer processed goods behemoth Unilever (NYSE: UL) will release 16 new products in the refreshments category, in time for the start of the summer season. [1] The new frozen-treat products and varieties will be introduced across its ice cream and frozen dessert brands.

Unilever has tied in with Disney’s (NYSE: DIS) blockbuster animated movie, Frozen, for a special edition popsicles line. Other innovations and marketing plays include refreshed packaging, new multipacks and new flavors.

We have a price estimate of $40 for Unilever, which is about 5% lower than its current market price.

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See our complete analysis of Unilever here

A Boost to Unilever’s Ice Cream Business

The ice cream segment is categorized under Unilever’s Refreshment division, which was the second best performing division in 2014 after Home Care. According to our estimates, Unilever’s revenues from the ice cream segment stood at $6.9 billion [2] in 2014, which is 12% of the company’s total revenues. The overall Refreshments segment achieved underlying (non-GAAP) sales growth of 3.8% in 2014. Since the ice cream business forms a major part of the Refreshments segment, it can be deduced that the Unilever’s ice creams business grew around a rate of 3.8% year on year in 2014.

Unilever’s market share in the global ice cream market expanded from 20.4% in 2013 to 20.9% in 2014. [3] Now, the company seems to have pinned its hopes on the 16 new products to continue the growth momentum of its ice cream business in 2015.

Low Margins Remain a Cause of Concern

Unilever’s Refreshment division had a core (non-GAAP) operating margin of 8.8% in 2014, which was better only than the 6.3% core operating margin of the Home Care division. We estimate the EBITDA margin of the ice cream segment to be 10.7% in 2014, which is considerably lower than the EBITDA margins of Unilever’s other segments. In fact, the EBITDA margin of Unilever’s ice cream segment has declined every year since 2008, with the sole exception of 2012.

However, it is worth mentioning that Unilever acquired the premium Talenti Gelato and Sorbetto brands last December. Talenti, which is estimated to have revenues of $120 million in 2014, [4] is likely to improve the margins of Unilever’s ice cream business going forward. However, it remains to be seen whether the new products to be launched by Unilever will gain enough traction to notably impact its ice cream business’ bottom lines.

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Notes:
  1. 16 Mouthwatering New Frozen Treats For 2015 From Unilever Ice Cream, PR Newswire, March 25, 2015 []
  2. Based on 2014 average exchange rate of $1.1766 per Euro []
  3. Based upon Euromonitor data provided by Unilever’s Communications Team []
  4. Talenti Gelato & Sorbetto Joins The Unilever Family, PR Newswire, December 2, 2014 []