There are many reasons why Unilever (LSE: ULVR) is a great investment. The company has a well-diversified brand portfolio, with good brand recognition among customers all over the world. Indeed, the company’s brands are a staple purchase for many households, making it one of the most defensive businesses around.
As well as its defensive product portfolio, Unilever has a significant and expanding presence in fast-growing emerging markets, wide profit margins and is investing billions in developing new products for the modern world.
But what makes Unilever really stand out from the rest of the pack is the company’s investment in people.
Investing for the future
The best companies are concerned about more than just profit. Good managements understand that for a business to be successful over the long term, all of its stakeholders (including customers, suppliers, owners, and employees) must be happy. This means profitability might not be as high as it could be, but this is a price worth paying for a responsible company.
Stakeholder responsibility has always been a part of Unilever’s culture. From the very beginning when the company educated medical professionals about the benefits of using its soap and built a town for its employees, the company has always put funds aside to make sure it is acting responsibly.
The group is currently on a mission to achieve a set of strict environmental goals by 2020. Including sending zero waste to landfill, achieving zero net deforestation associated with four essential commodities, palm oil, soy, paper and beef, and sourcing 100% of agricultural raw materials sustainably.
People, not profit
Unilever’s mission to be a responsible corporation is one of the reasons why the company has been such a success over its near 100-year life.
Environment goals and targets such as the firm’s aim to help more than a billion people to improve their health and hygiene by 2020, are highly effective marketing tools and will ensure the next generation trusts the company, and its products. Even though these actions will impact short-term profits, over the long run, investors will almost certainly benefit as consumers return to the company again and again.
For a company to be able to grow, it has to invest in the future. Unilever is investing in the future of people alongside its product development. These investments should pay off for the company over the next several decades, as they have done over the past century.
The bottom line
Unilever’s history shows that it pays to look after all stakeholders and the company is continuing on this path today. That’s why the company seems to be a great investment for the next decade or so.
Even though the shares might look expensive today, as they trade at a forward P/E of 22.7 and yield only 2.8%, it’s unlikely that over the long term investors will lose money with the business.
