How Unilever Could Benefit From Acquiring The Laundress
Unilever (NYSE: UL) has signed an agreement to acquire The Laundress, a global premium eco-friendly line of detergent, fabric care, and home cleaning products based in the U.S, for an undisclosed sum. The acquired company’s portfolio is comprised of 85 eco-friendly products across laundry and home cleaning, which can strengthen Unilever’s presence in the premium home care segment.
Unilever’s stock price has fluctuated between $51 and $57 since the beginning of 2018. We have maintained our long-term price estimate for Unilever at $58, which is around 10% ahead of the current market price. We have created an interactive dashboard on Unilever’s Revenue and EBITDA breakdown, which details our forecasts for the company in the near term. You can modify our assumptions to see the impact any changes would have on the company’s revenue and EBITDA. Overall, we expect Unilever to generate around $62.4 billion in revenues in 2019, and earnings of almost $7.7 billion. Of the total expected revenues in 2019, we estimate $13.6 billion in the Foods business, around $11.9 billion for the Refreshments business, nearly $24.3 billion for the Personal Care segment, and almost $12.6 billion in the Home Care business.
Focus on Home Unilever’s Home Care Segment
Unilever’s Home Care segment contributes around 20% of the company’s total revenues, with an EBITDA contribution of around 15%. The company’s Home Care segment has increased its footprint in emerging markets of late with its proven market development model and benefit-led innovations. This growth was broad-based with the exception of Latin America in fiscal 2018 so far. In fact, Unilever’s products are priced lower than P&G’s products, and are also sold in smaller pack sizes in emerging markets such as India and China. This, coupled with a much deeper supply chain and distribution network, could help Unilever grow further in developing economies. To give some perspective, emerging markets play a vital role in Unilever’s business, as almost 60% of its total revenues come from these markets.
Unilever also faces intense competition from leading laundry care brands such as Tide & Ariel (Procter and Gamble products), whose global market share is almost twice that of Unilever. The company is aiming to gain a larger share of this market, particularly in North America, as competing brands try to gain access to consumers in markets where Omo & Surf are present. The addition of The Laundress’ capabilities to Unilever’s portfolio can help the company further compete in the already saturated U.S. market. Altogether, the Laundress acquisition seems to be a small but positive step towards consolidation of Unilever’s position in the global home care market.
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