Executive Summary / Key Takeaways

• Unilever is undergoing a profound transformation, shifting its portfolio towards higher-growth Beauty & Wellbeing and Personal Care segments, with a strategic focus on the U.S. and India, aiming for multi-year volume growth of at least 2% and consistent gross margin expansion.
• The company's commitment to technological differentiation, exemplified by innovations like Vaseline's GlutaGlow™ and Persil's Pro-S™ technology, is driving product superiority, premiumization, and market share gains, providing a competitive edge.
• Recent financial performance in H1 2025 shows underlying sales growth of 3.4%, with strong contributions from developed markets and improving momentum in emerging markets, supported by a significant increase in brand and marketing investment to 15.5% of turnover.
• The planned demerger of the Ice Cream business by mid-November 2025 and an accelerated productivity program are set to create a leaner, more agile "RemainCo" with a structurally higher margin profile and improved returns.
• While macroeconomic uncertainties, commodity inflation, and specific market challenges persist, Unilever's disciplined execution of its Growth Action Plan 2030 and strategic portfolio reshaping position it for sustained, high-quality growth and enhanced shareholder value.

A Global Consumer Powerhouse in Transformation

Unilever PLC, a venerable consumer goods giant founded in 1860, is in the midst of a significant strategic reawakening. The company, known for its vast portfolio spanning Beauty & Wellbeing, Personal Care, Home Care, Foods, and Ice Cream, is executing a comprehensive Growth Action Plan (GAP) 2030 to drive higher, more consistent performance and unlock its full potential. This transformation is rooted in a clear vision: to shift its portfolio towards faster-growing, higher-margin segments, with a disproportionate focus on key markets like the U.S. and India.

The global fast-moving consumer goods (FMCG) industry is characterized by intense competition, evolving consumer preferences, and increasing demand for sustainable and premium products. Unilever operates in highly competitive markets, with the global personal care market valued at $565.7 billion in 2023, home care at $198.3 billion, and food and beverages at $8.7 trillion. In this dynamic landscape, Unilever's overarching strategy is to achieve "desire at scale" for its brands, leveraging operational excellence and fostering a "play to win" culture.

Technological Edge: Fueling Product Superiority and Market Gains

At the heart of Unilever's strategic pivot is a deep commitment to technological differentiation and innovation. The company invests approximately €1 billion in R&D annually and holds a portfolio of over 20,000 patents and patent applications worldwide. This investment is translating into tangible benefits across its diverse product categories.

In Beauty & Wellbeing, the Dove relaunch features "cutting-edge fiber repair technology" and a complete packaging redesign, enhancing product efficacy and consumer appeal. Vaseline's Gluta-Hya range incorporates "cutting-edge serum technologies and invisible sun protection factor," with its hero ingredient, GlutaGlow™, clinically proven to be 10 times more powerful than vitamin C in boosting skin brightness. This innovation caters to specific skincare needs in hot and humid climates, driving double-digit growth for Vaseline for two consecutive years. Similarly, the Wellbeing business, encompassing brands like Liquid I.V. and Nutrafol, has delivered strong double-digit growth for 21 consecutive quarters, fueled by a robust pipeline of innovations. Liquid I.V., for instance, has expanded into seven new markets, demonstrating the scalability of these science-backed offerings.

The Home Care segment also showcases significant technological advancements. Persil's Wonder Wash, designed for short and cold wash cycles, utilizes patented Pro-S™ technology, a combination of fast-acting ingredients that removes bad smells and residues. This innovation is creating a new category of laundry products, with 35 patents pending at launch, and is on track to become a €100 million innovation platform, rolling out to 22 markets by the first half of 2025. Comfort CrystalFresh technology, bringing "superior fragrances to the fabric booster market," has contributed to high single-digit volume growth for Fabric Enhancers. These technological advancements provide Unilever with a competitive moat, enabling premiumization, driving market share gains, and ultimately contributing to higher average selling prices (ASPs) and improved margins. The company's R&D efforts are also focused on sustainability, with long-term science and technology programs exclusively targeting positive sustainability benefits and aiming for 100% renewable energy in operations by 2030.

Unilever is also leveraging digital technologies, including artificial intelligence (AI), big data, and cloud computing, to enhance its operational and service capabilities. "Project Sky," an AI-driven initiative, aims to significantly improve planning and forecasting, with positive results already seen in service and forecasting accuracy. This digital transformation extends to supply chain resilience, identifying alternative ingredients for sustainability and cost efficiency, and optimizing design and manufacturing processes through virtual simulations and automated workflows.

Competitive Landscape and Strategic Positioning

Unilever operates in a highly competitive arena against global titans such as Procter & Gamble (PG), Nestle (NSRGY), Colgate-Palmolive (CL), and Kimberly-Clark (KMB). Each competitor brings distinct strengths, influencing Unilever's strategic choices.

Procter & Gamble, a leader in personal care and household products, often demonstrates superior profitability through higher operating margins from cost leadership and faster product rollouts. Unilever differentiates itself with a strong emphasis on sustainability and ethical sourcing, particularly appealing to environmentally conscious consumers, which can enhance brand loyalty and market share in eco-aware regions. While PG excels in premium pricing power, Unilever's focus on social and environmental responsibility provides a unique value proposition.

Nestle, a dominant force in food and beverages, prioritizes nutritional science and health-focused segments. Unilever, with brands like Knorr and Hellmann's, competes by emphasizing plant-based and sustainable options. Nestle's operational efficiencies and specialized focus can lead to higher net margins, but Unilever's integrated approach to sustainability across all segments strengthens its brand loyalty.

Against Colgate-Palmolive, which specializes in oral and personal care, Unilever's Dove brand stands out with a holistic approach to wellness and sustainability. While CL leads in cost efficiency and specialized, affordable solutions, Unilever's emphasis on inclusive branding and broader segmentation provides a wider market positioning. Similarly, in home care, Unilever's eco-friendly formulations for brands like Domestos and Cif contrast with Kimberly-Clark's focus on durability and accessibility in everyday products.

Unilever's competitive standing is further bolstered by its improving "unmissable brand superiority scores" (UBS), with 60% of its revenue now showing strengthening brand power. The company is gaining market share in key developed markets like the U.S. and Europe, and in emerging markets such as India. In a recent "Advantage Survey," Unilever was ranked the #1 supplier in Personal Care, #1 in Foods, and #3 in Beauty, a level of recognition "never achieved that before". This indicates improved execution and stronger relationships with retailers.

However, challenges remain. Unilever has experienced softness in competitiveness in China due to market resets and a consumer shift to emerging channels like Douyin, and in Indonesia due to significant operational resets. In Laundry Brazil, aggressive pricing led to temporary market share loss, which has since been corrected. The company's strategy of "piling assets in the Beauty and Personal Care space and the Wellbeing space particularly in the U.S." through bolt-on acquisitions like Wild and Dr. Squatch, aims to fill gaps in premium and natural segments and build a portfolio of American brands with international travel potential.

Financial Performance and Strategic Momentum

Unilever's financial performance in the first half of 2025 reflects the initial benefits of its strategic transformation. The company delivered underlying sales growth (USG) of 3.4%, with a balanced contribution of 1.5% volume growth and 1.9% price growth. This marked a sequential improvement in Q2 2025, with USG rising to 3.8% (1.8% volume, 2% price). Developed markets, representing 44% of group turnover, continued their strong trajectory with 4.3% USG, driven by 3.4% volume. North America, in particular, saw underlying sales grow 5.4%, with 3.7% from volume, reflecting successful portfolio transformation. Europe also demonstrated robust growth of 3.4%, with 2.8% from volume.

Emerging markets, accounting for 43% of group turnover, showed improving momentum, with Asia Pacific Africa growing 3.5% in H1 2025 and accelerating to over 5% in Q2. India, a critical market, delivered 5% USG in Q2, largely volume-driven, with continued market share gains. However, Latin America experienced a volume decline of 4.6% in H1 2025 due to necessary pricing actions to offset currency depreciation and subdued market conditions.

Profitability metrics highlight the structural strengthening of gross margin, a core objective of the Growth Action Plan. While underlying operating margin (UOM) for H1 2025 was 19.3%, a 30 basis point decline year-on-year, this was a direct result of increased brand and marketing investment (BMI). BMI rose by 40 basis points to 15.5% of turnover, with 100% of the incremental investment directed towards Power Brands, particularly in Beauty & Wellbeing and Personal Care. This strategic reinvestment is crucial for long-term brand health and competitive positioning. Overheads improved by 10 basis points, reflecting productivity gains and tighter cost control. Underlying operating profit for H1 2025 was EUR 5.8 billion, a 4.8% decline, and underlying earnings per share (EPS) was EUR 1.59, down 2.1%. Free cash flow for H1 2025 was EUR 1.1 billion, lower than the prior year due to separation costs and higher working capital.

A Sharper Future: Demerger and Productivity Drive

A pivotal moment in Unilever's transformation is the planned demerger of its Ice Cream business, set for mid-November 2025. This strategic move will create an independent entity, The Magnum Ice Cream Company, with Unilever retaining a stake of just below 20% for up to five years. The proceeds from the eventual sale of this stake will be used to cover separation costs and reduce net debt.

Post-demerger, the remaining Unilever business is projected to be a EUR 52 billion enterprise with a structurally higher margin profile, including a gross margin of 46.7% (up 160 basis points on 2024 financials) and an underlying operating margin of 19.4% (up 100 basis points). Return on invested capital (ROIC) is also expected to improve by 100 basis points to 19.1%.

Complementing the demerger is a company-wide productivity program, initiated in March 2024, which is ahead of schedule. This program aims to achieve approximately EUR 650 million in cumulative savings by year-end 2025, a EUR 100 million increase from previous guidance. It involves a reduction of 7,500 roles by the end of 2025, creating a leaner, more accountable organization. This focus on operational excellence and cost discipline is expected to provide significant fuel for continued brand investment and margin expansion.

Outlook and Risks

Unilever's management is confident in delivering its full-year 2025 outlook, projecting underlying sales growth within the 3% to 5% range. Growth is expected to accelerate in the second half, driven by sustained performance in developed markets and improving momentum in emerging markets, particularly Asia. The underlying operating margin is anticipated to show a modest improvement for the full year, with second-half margins of at least 18.5%. The company aims for multi-year volume growth of at least 2% for the "RemainCo" and consistent gross margin expansion, translating into mid-single-digit underlying sales growth and modest margin improvement. Free cash flow conversion is expected to be around 100% for the full year.

Despite this positive outlook, several risks warrant investor attention. The macroeconomic and currency environment remains uncertain, with a projected 5% to 6% negative currency impact on full-year turnover if current exchange rates persist. Inflationary pressures from commodities like palm oil, surfactants, and cocoa are expected to continue, with an estimated annual material inflation of around €0.78 billion for 2025. Challenges in specific markets, such as the ongoing resets in Indonesia and China, and subdued market growth in Latin America, could impact volume performance. The recent resignation of Ben & Jerry's co-founder Jerry Greenfield, citing Unilever's alleged silencing of the brand's social mission, highlights potential brand reputation and governance risks, particularly concerning the independent board's role and the brand's activism.

Conclusion

Unilever is embarking on a decisive path to redefine its future as a more focused, agile, and profitable consumer goods leader. The strategic shift towards Beauty & Wellbeing and Personal Care, coupled with a relentless pursuit of technological innovation and operational excellence, forms the bedrock of its investment thesis. The impending demerger of the Ice Cream business and the accelerated productivity program are transformative steps, poised to unlock significant value by creating a leaner organization with a superior financial profile.

While the journey is not without its complexities, including macroeconomic headwinds and competitive pressures, Unilever's commitment to its Growth Action Plan 2030, underpinned by robust brand investment and a culture of accountability, positions it for sustained, high-quality growth. Investors should recognize the long-term potential embedded in this strategic reawakening, as Unilever leverages its foundational strengths and technological leadership to drive consistent performance and enhance shareholder returns in an evolving global market.