Unilever, the consumer goods giant behind brands like Dove, Ben & Jerry's, and Hellmann's, is likely to report slower but still better-than-expected growth for the third quarter, according to a preview from UBS. The investment bank expects underlying sales growth of 5% for the period, a step down from the 5.5% recorded in the second quarter but still ahead of the 4.46% consensus compiled by Visible Alpha.
The forecast, published Monday, suggests that while the pace of growth is cooling, Unilever's core business remains resilient in a challenging consumer environment.
Volume-led growth continues
UBS analysts believe Unilever's growth will remain driven by volume rather than price increases. They project underlying volume growth of 3.2% for the quarter, down from 5.5% in Q2 but still above the 2.2% consensus. This is a notable shift from the past couple of years, when price hikes—not volume—were the main engine of growth as companies passed on higher input costs to consumers.
Now, with inflation easing in many markets, Unilever is leaning more on selling more units rather than charging more. That is generally seen as a healthier sign, as it indicates consumer demand is holding up rather than being propped up by higher prices.
Easier comparisons in key markets
A big part of the expected outperformance comes down to easier year-over-year comparisons in two important regions: Latin America and India. Together, these markets account for roughly 27% of Unilever's sales.
In Latin America, which makes up about 14% of sales, volumes fell 7.3% in the same quarter last year. That steep decline means this year's numbers have a much lower bar to beat, making even modest growth look strong. In India, which contributes around 13% of sales, volumes were flat a year ago due to disruptions from the goods and services tax (GST) rollout. A flat base again makes this year's comparison easier.
UBS expects these easier comparisons to provide a tailwind, helping Unilever beat consensus even as its overall growth rate cools.
What this means for investors
For everyday investors, the key takeaway is that Unilever's growth story is moderating but not collapsing. The company has been through a period of heavy price increases, and now it's transitioning to a more volume-driven model. That transition is going relatively smoothly, according to UBS's estimates.
However, investors should keep an eye on whether volume growth can hold up as comparisons get tougher in the coming quarters. The easy wins from Latin America and India will eventually fade, and Unilever will need to sustain momentum on its own.
Unilever is also in the middle of a broader restructuring effort, including cost-cutting and a push to focus on its top brands. These moves are designed to improve profitability over the long term, but they can also create short-term noise in the numbers.
For context, other consumer goods companies have faced similar pressures. Reckitt recently trimmed its sales forecast due to supply issues, highlighting how operational hiccups can weigh on growth. Unilever's expected performance, by contrast, suggests it is navigating the environment relatively well.
Investors will get the official numbers when Unilever reports its third-quarter results later this month. The market will be watching not just the headline growth figure, but also whether the company maintains its full-year guidance and how it frames the outlook for the crucial holiday quarter.
Broader market context
Unilever's results come at a time when consumer spending is under pressure in many parts of the world. High interest rates and lingering inflation have squeezed household budgets, forcing shoppers to trade down to cheaper brands or buy less. Companies that can still grow volumes in this environment are often rewarded by investors.
At the same time, the broader market has been volatile, with concerns about economic slowdowns in Europe and China. Unilever's diverse geographic footprint, with significant exposure to emerging markets like India and Latin America, provides some insulation, but it also means the company is sensitive to currency swings and local economic conditions.
UBS's forecast is just one bank's view, and actual results could differ. But the fact that a major investment bank sees Unilever beating consensus even as growth cools is a positive signal for shareholders.
For those looking at the wider consumer staples sector, Unilever's performance could also offer clues about the health of the global consumer. If Unilever can keep growing volumes, it bodes well for other companies in the space. Conversely, any disappointment could raise questions about the resilience of consumer demand.
As always, investors should consider their own financial goals and risk tolerance when evaluating any stock. Unilever's shares have been a steady, dividend-paying holding for many, and the company's ability to navigate a tough environment will be key to maintaining that reputation.
