Why Are Unilever plc, PZ Cussons plc, SABMiller plc And Reckitt Benckiser Group Plc Struggling To Grow?

At first glance, it would appear as if the global economy is finally recovering from the financial crisis. However, while the economies of the US and UK are rapidly recovering, the sales of some of the world’s largest consumer goods companiesunilever2 are slowing, as emerging markets run out of steam. 

Cash strapped consumer 

Unilever’s (LSE: ULVR) management noted that, during the third quarter, the company’s sales came under pressure from two major factors. Firstly, price deflation hit sales across Europe as the company’s peers slashed prices to try and capture market share, drawing the attention of the cash strapped European consumer. And secondly, the company was impacted by de-stocking within China, which is expected to be completed by year-end.

Aside from these two factors, the company’s growth during the quarter was held back by disposals, which reduced turnover by 1.5% and negative currency impacted sales by 2.6%. Still, underlying sales expanded 2.1% year on year for the period, although adjusted sales growth within emerging markets fell to 6.2%, from 6.6% as reported in the same period last year.

Slowing China 

Slowing Chinese sales have also affected SABMiller (LSE: SAB). During the first half of the year, SAB’s net producer revenue within Asia declined by 1% with revenue within Australia declining the fastest at 4%.

Further, US sales volumes declined at a similar rate for the period. US domestic sales volume to retailers declined 2.5% for the half year and by 3.7% in the second quarter. However, over in Africa net producer revenue expanded 10%. European revenue, including revenue from the UK expanded by 11%.

So, it seems as if SAB’s troubles stem from the US, not emerging markets.

Lower end of expectations 

Reckitt Benckiser’s (LSE: RB) sales growth is slowing particularly within South East Asia and Latin America. During the third quarter sales within these regions only expanded 3% year on year, compared to last year’s growth rate of 3.7%.  Management now expects the group to report annual revenue growth at the lower end of expectations. Revenue growth of 4% to 5% for the year is targeted.

And just like SAB, Reckitt is struggling within North America. The company has noted that the North American market has been one of the group’s toughest sales regions year to date.

It’s unclear why the company is having a tough time within North America, although the U.S. is the home of some of the world’s largest consumer goods companies such as P&G as well as Johnson & Johnson. Reckitt could be suffering from increasing competition.  


PZ Cussons’ (LSE: PZC) most recent trading statement, released at the end of September, painted a dismal picture. For the most part trading was in line with expectations but management described the company’s trading outlook as ‘challenging’.

Nevertheless, PZ Cussons is cutting costs and diversifying into new arrears of growth, such as baby food and yoghurt. These actions should help turn the group into a more rounded company with assets similar to those of larger peers, such as Unilever.

Solid picks

All in all, it seems as if these companies are painting a mixed picture of the global economy. The North American market appears tough, as competition increases, with both SAB and Reckitt reporting falling sales. China is also proving tough. It seems as if, after years of rapid growth, the country’s consumers are now reigning in spending, instead looking to domestic brands.

Still, while SAB, Unilever, Reckitt and PZ Cussons are reporting slowing sales growth, the four companies remain great picks for any portfolio. Indeed, steady growth over the past few years has supported above-inflation annual dividend hikes and these payouts are unlikely to be cut any time soon.

For example, SAB current offers a dividend yield of 2%, covered twice by earnings per share. Unilever supports a yield of 4.4%, covered one-and-a-half times. Reckitt’s yield stands at 2.6%, once again covered twice by earnings per share and finally PZ Cussons supports a yield of 2.1%, covered twice by earnings. 

Good enough to retire on

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of PZ Cussons and Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.