Executive Summary / Key Takeaways

• Unilever is undergoing a profound transformation under its Growth Action Plan (GAP), prioritizing volume-led growth, gross margin expansion, and a strategic shift towards Beauty & Wellbeing and Personal Care, evidenced by recent bolt-on acquisitions and disposals.
• The company delivered solid financial performance in the first half of 2025, with underlying sales growth of 3.4% and a commitment to accelerate growth in the second half, driven by strong performance in developed markets and improving trends in emerging economies.
• Unilever's technological differentiation, including patented innovations like Persil Wonder Wash and Dove's fiber repair technology, underpins its "Unmissable Brand Superiority" framework, driving premiumization and competitive advantage in key categories.
• The planned demerger of the Ice Cream business by mid-November 2025 is a pivotal move, expected to create a more focused Unilever with a structurally higher margin profile, improved returns, and strong cash generation.
• Despite facing macroeconomic headwinds such as commodity inflation and currency volatility, Unilever is committed to maintaining competitive brand investment and delivering positive hard currency earnings growth in 2025, supported by robust productivity savings.

A Global Consumer Powerhouse Reimagined

Unilever PLC (UNLYF), a venerable institution in the fast-moving consumer goods (FMCG) sector since 1860, is currently executing a comprehensive strategic overhaul designed to unlock sustained, high-quality growth and enhance shareholder value. The company's core business spans five segments: Beauty & Wellbeing, Personal Care, Home Care, Foods, and Ice Cream, serving a global consumer base with iconic brands like Dove, Knorr, and Hellmann's. This strategic reinvigoration, encapsulated in the "Growth Action Plan" (GAP) and its long-term vision, GAP 2030, is fundamentally reshaping Unilever's portfolio, operational efficiency, and market approach.

The industry landscape is characterized by evolving consumer preferences, increasing demand for premium and sustainable products, and the rapid expansion of digital commerce. In this dynamic environment, Unilever competes directly with global giants such as Procter & Gamble (PG), Nestle (NSRGY), Johnson & Johnson (JNJ), and Colgate-Palmolive (CL). Unilever's market positioning is bolstered by its extensive brand portfolio and broad international presence, allowing it to maintain a strong foothold across diverse geographies. The company's emphasis on sustainability and ethical sourcing provides a distinct advantage, particularly in environmentally conscious segments, differentiating it from competitors who may prioritize operational scale or specialized innovation.

Unilever's strategic transformation is deeply rooted in its history of adapting to market shifts. The company has consistently invested in brand building and innovation, as exemplified by Vaseline, a 155-year-old brand that has achieved an impressive 11% compounded annual growth rate over the four years leading up to 2025, with over 10% volume growth in 2024 and the first half of 2025. This longevity and sustained growth underscore Unilever's capacity for brand reinvention and market relevance.

Technological Edge and Innovation Driving Superiority

A cornerstone of Unilever's competitive strategy is its commitment to technological differentiation and innovation, which directly translates into superior product performance and market leadership. The company is leveraging advanced science and proprietary technologies across its portfolio to deliver tangible benefits to consumers and maintain a competitive moat.

In Hair Care, Dove has introduced cutting-edge fiber repair technology, enhancing product efficacy and consumer appeal. For Skin Care, Vaseline's Gluta-Hya range incorporates advanced serum technologies and invisible sun protection factor (SPF), addressing evolving consumer needs for effective and convenient skincare solutions. This innovation has been a key driver behind Vaseline's exceptional volume growth. In Deodorants, the successful launch of whole body deodorants under the Dove and Dove Men+Care brands, featuring superior odor control technology, has contributed to double-digit growth in this category during the first half of 2025.

Perhaps one of the most impactful technological advancements is Persil Wonder Wash in Home Care. This product utilizes patented Pro-S technology, making it the first-ever detergent specifically designed for short-cycle washes. This innovation directly addresses the growing consumer trend towards more efficient and environmentally friendly laundry habits. Wonder Wash has achieved excellent market share results and is expected to become a €100 million innovation platform, having already rolled out to 22 markets and targeting 50 by the end of 2025. Similarly, Comfort CrystalFresh technology delivers superior fragrances in fabric enhancers, contributing to high single-digit volume growth. In Prestige Beauty, the acquisition of K18, a biotech haircare brand, further underscores Unilever's investment in science-backed, high-performance products, with K18 already demonstrating double-digit growth.

Beyond product-specific technologies, Unilever is enhancing its operational capabilities through digital innovation. The Sky program, piloted with Walmart (WMT) Mexico and expanding to Walmart U.S., leverages AI to significantly improve planning and forecasting. This initiative is yielding a clear uptick in service and forecasting precision, enhancing supply chain efficiency and retailer relationships.

These technological differentiators are integral to Unilever's "Unmissable Brand Superiority" (UBS) framework. This holistic approach assesses brand performance across 21 metrics, encompassing six key "Ps": product, packaging, proposition, promotion, place, and price. The causal link between improvements in these areas and stronger brand performance has been validated in over 119 strategic sales, with 60% of Unilever's portfolio strengthening its UBS scores. This framework ensures that innovations are not only technologically advanced but also resonate across all aspects of consumer preference. For investors, this technological leadership translates into several benefits: enhanced pricing power, stronger customer loyalty, and improved market share in premium segments. It underpins Unilever's ability to drive consistent growth, expand margins, and maintain a competitive edge against rivals who may struggle to match the breadth and depth of its innovation pipeline.

Strategic Transformation and Financial Discipline

Unilever's strategic transformation is centered on six core principles: a decisive shift towards Beauty & Wellbeing and Personal Care, disproportionate investment in key markets like the U.S. and India, a focus on premium science-based innovation, the "desire at scale" approach for brand elevation, operational excellence, and fostering a winning culture. This strategic pivot is evident in the company's recent portfolio actions. Unilever has made targeted bolt-on acquisitions, including Wild (refillable deodorant) and Dr. Squatch (male grooming) in 2025, and Minimalist (premium beauty) in India in April 2025. These acquisitions strategically fill gaps in natural, super-premium, and actives-led beauty segments, aligning with the company's goal to build a portfolio of digitally native, authentic, and lifestyle brands with strong digital commerce footprints.

Concurrently, Unilever has divested non-strategic assets, such as Elida Beauty (June 2024), its water purification businesses (Truliva in August 2024, Qinyuan Group and Pureit in 2024), and its Russian subsidiary (October 2024). Further disposals of Foods brands like Unox, Conimex, Zwan, and The Vegetarian Butcher are planned for 2025, with a target of €1.5 billion to €2 billion in total disposals. This disciplined portfolio reshaping is designed to expose Unilever to higher-growth segments and improve its overall margin profile.

Financially, Unilever delivered a resilient performance in the first half of 2025, with underlying sales growth of 3.4%. This was characterized by a healthy balance of volume (1.5%) and price (1.9%) growth, with volumes improving sequentially across all business groups. Turnover for the first half was €30.1 billion, a 3.2% year-on-year decline, primarily due to a 4% negative currency impact and a 2.5% impact from net disposals. Underlying operating profit for H1 2025 was €5.8 billion, a 4.8% decline, leading to an underlying operating margin of 19.3%, down 30 basis points. Underlying earnings per share (EPS) also saw a 2.1% decline to €1.59, largely due to a 5.1% adverse currency impact.

Despite these headwinds, the company's underlying financial health shows structural improvements. In 2024, gross margin expanded by 280 basis points to 45.0%, surpassing pre-COVID levels in most segments. This strong gross margin is considered the "backbone of our financial plan," providing fuel for increased brand and marketing investment (BMI). BMI reached 15.5% of turnover in 2024, the highest in over a decade, with 100% of incremental investment in H1 2025 directed towards Power Brands, particularly in Beauty & Personal Care. The company's productivity program is also ahead of schedule, targeting approximately €650 million in cumulative savings by year-end 2025.

Free cash flow for H1 2025 was €1.1 billion, lower than the prior year due to Ice Cream separation costs and higher working capital for supply chain resilience. However, Unilever remains confident in achieving around 100% free cash flow conversion for the full year. The company's net debt to underlying EBITDA stood at a healthy 1.9 times at year-end 2024. Capital expenditure increased to €1.9 billion in 2024, with over 55% of H1 2025 CapEx allocated to margin-accretive initiatives, reflecting a disciplined approach to enhancing long-term profitability.

Competitive Landscape and Strategic Positioning

Unilever operates in a highly competitive global market, directly challenging industry leaders like Procter & Gamble, Nestle, Johnson & Johnson, and Colgate-Palmolive. Unilever's strength lies in its diversified portfolio and a strong focus on sustainability, which resonates with an increasingly conscious consumer base. While competitors like P&G often emphasize premium pricing and operational efficiency, Unilever differentiates itself through ethical sourcing and a broader appeal in environmentally conscious segments. Nestle, a dominant force in foods, faces Unilever's strong food brands like Hellmann's and Knorr, with Unilever gaining an edge through its holistic approach to health and sustainability.

In the personal care space, Unilever's brands like Dove compete directly with Johnson & Johnson's offerings. Unilever's broader focus on everyday consumer goods provides a more versatile market positioning compared to J&J's healthcare emphasis. Against Colgate-Palmolive, Unilever's wider product range in home and personal care offers a more comprehensive solution for households.

Unilever's market share performance reflects its strategic interventions. The company is gaining market share in critical developed markets like the U.S. and Europe, as well as in India. In Latin America, aggregated shares have been positive for six consecutive quarters, despite some short-term challenges in Laundry Brazil due to competitive pricing. The company's "Unmissable Brand Superiority" framework and sustained high brand marketing investment (15-16% of turnover) are crucial in this competitive environment, especially as some competitors are reducing their investment. This commitment to brand support, coupled with strong retailer relationships (ranked #1 supplier in Personal Care and Foods, #3 in Beauty in the U.S. Advantage Survey), underpins its competitive resilience.

However, Unilever faces vulnerabilities, including exposure to commodity price fluctuations (e.g., palm oil, cocoa) and the need for continuous innovation speed. The company's response to commodity inflation, estimated at €0.8 billion for 2025, involves calibrated price increases and value chain interventions. In markets like China and Indonesia, Unilever has faced specific challenges, including consumer shifts to new digital channels (e.g., Douyin in China) and geopolitical-related consumer backlash in Indonesia. The company is implementing significant interventions in these markets, including resetting route-to-market strategies and accelerating portfolio changes, with expected benefits materializing from the second half of 2025.

Outlook and Strategic Demerger

Unilever's management is confident in its full-year 2025 outlook, projecting underlying sales growth within the 3% to 5% range. While a "slower start to 2025 with subdued market growth" is anticipated, growth is expected to accelerate in the second half, driven by continued outperformance in developed markets and improving momentum in emerging markets, particularly Asia. Underlying operating margin is forecast for a modest improvement in 2025, with second-half margins of at least 18.5%, reflecting volume leverage, higher productivity, and value chain interventions.

A pivotal strategic move is the demerger of the Ice Cream business, scheduled for mid-November 2025. This complex separation has progressed well, with Ice Cream operating as a standalone business since July 1, 2025. Unilever intends to retain a stake of just below 20% in The Magnum Ice Cream Company for up to five years, demonstrating confidence in its future potential. This demerger is expected to significantly reshape Unilever's financial profile, transforming it into a €52 billion business (based on 2024 financials) with a structurally higher gross margin of 46.7% (up 160 basis points), an underlying operating margin of 19.4% (up 100 basis points), and an improved return on invested capital of 19.1% (up 100 basis points). The proceeds from the eventual sale of the retained stake will be used to cover separation costs and reduce net debt.

Management remains committed to delivering positive hard currency earnings growth in 2025, provided the euro-dollar exchange rate remains stable. The multi-year objective for the remaining company is to achieve at least 2% volume growth and consistent gross margin expansion, which is expected to translate into mid-single-digit underlying sales growth and modest margin improvement, ultimately providing top-third returns to shareholders.

Conclusion

Unilever is in the midst of a determined transformation, strategically refocusing its portfolio and leveraging technological innovation to drive sustainable, profitable growth. The company's disciplined execution of its Growth Action Plan, marked by a commitment to "Unmissable Brand Superiority" and significant investments in R&D and brand marketing, is yielding tangible results in market share gains and structural margin improvement. The impending demerger of the Ice Cream business represents a bold step towards a more agile and higher-margin enterprise, poised to capitalize on premiumization and wellness trends in Beauty & Wellbeing and Personal Care.

While macroeconomic uncertainties, including commodity inflation and currency volatility, present ongoing challenges, Unilever's proactive measures in pricing, productivity, and portfolio management demonstrate a robust strategic response. The company's strong competitive positioning, underpinned by its global brands and extensive distribution, combined with a clear technological roadmap and a commitment to operational excellence, positions it favorably for long-term value creation. Investors should observe the continued acceleration of volume growth in key emerging markets and the successful integration of new technologies and acquisitions as critical indicators of Unilever's sustained momentum and enhanced shareholder returns.