How Unilever PLC Makes Money

Unilever's business model is built on the deceptively simple insight that billions of people, regardless of income level, geography, or culture, need to clean, feed, and care for themselves every single day. **Pricing Architecture: Sachet Economics** Unilever sells through an extraordinarily diverse distribution ecosystem. In the beauty and personal care categories, Unilever faces a new wave of digitally native challengers — brands like Function of Beauty, Native, Harry's, and Necessaire — that have built loyal consumer bases through social media marketing, subscription models, and customization in ways that large traditional CPG companies struggle to replicate at speed. In beverages, Unilever's tea portfolio — including Lipton, PG Tips, and Brooke Bond — competes in a global hot beverages category adjacent to the coffee-dominated world of Nestlé's Nespresso and JAB Holding's portfolio. The long-term decline in tea consumption in many developed markets, particularly as younger consumers favor specialty coffee, energy drinks, and functional beverages, has pressured the Lipton business. The brand's outspoken political activism — including its 2021 decision to halt sales in the Israeli-occupied territories, which sparked a major dispute with its Israeli licensee and triggered a lawsuit — created a situation where Unilever ultimately sold the Israeli business over the objections of Ben & Jerry's independent board. Brand trust translates directly into pricing power: Unilever's branded products typically command a meaningful premium over private-label alternatives, and this premium has proven resilient through multiple economic cycles.

Schumacher's Growth Action Plan set ambitious targets: underlying sales growth in the range of 3 to 5 percent, underlying operating profit margin expansion to at least 18 percent by 2026, and a radical focus on fewer, bigger bets — namely those thirty Power Brands. In fiscal year 2024, Unilever reported total turnover of approximately 60.1 billion euros with underlying sales growth of 4.2 percent and an underlying operating margin of approximately 17.1 percent. Under CEO Hein Schumacher, the company is executing its Growth Action Plan, focused on accelerating thirty Power Brands, expanding margins, and separating its ice cream division. At the core of Unilever's commercial strategy is what the company calls its Power Brands — thirty brands each generating more than 1 billion euros in annual sales or with the potential to do so. These brands receive disproportionate marketing investment, innovation resources, and management attention. In 2024, Unilever spent approximately 7.3 billion euros on brand and marketing investment globally, representing about 12 percent of turnover — a figure that has increased meaningfully under the Growth Action Plan as the company commits to 'volume-led growth' rather than the pure price-led growth that characterized its 2022-2023 strategy. In developed markets, this primarily means major grocery retailers (Walmart, Kroger, Tesco, Carrefour), drugstore chains (CVS, Walgreens, Boots), and rapidly growing e-commerce platforms including Amazon, Tmall, and direct-to-consumer channels. In 2022 and early 2023, surging raw material inflation forced the company to implement double-digit price increases across many categories, temporarily boosting reported revenue growth while suppressing volume. The subsequent moderation in commodity prices in 2024 allowed Unilever to shift to a more balanced price-volume growth equation. **Premium and Prestige Beauty: The High-Growth Engine** One of the most important shifts in Unilever's business model over the past decade has been the deliberate build-out of a prestige beauty portfolio. These brands are growing faster than the core FMCG portfolio and serve as proof points that Unilever can compete in the same channel and consumer segments as Estée Lauder and LVMH's beauty division. This duality reflects both the company's historical evolution through decades of acquisitions and its deliberate strategy of building brands at multiple price points across radically different consumer markets. The Beauty and Wellbeing division is the company's fastest-growing and includes both mass-market brands like Dove and Sunsilk and premium brands like Dermalogica, Tatcha, and Paula's Choice — a portfolio composition that deliberately spans from the drugstore shelf to the department store beauty counter. The company's Growth Action Plan, under CEO Hein Schumacher, has already begun to deliver measurable results in margin expansion and volume recovery, setting up an intriguing strategic narrative heading into 2025 and 2026. P&G's decision in 2014 to dramatically streamline its portfolio — divesting more than 100 brands to focus on roughly 65 core brands — is widely credited with improving its organic sales growth trajectory and operating margins. Unilever's Growth Action Plan is, in many respects, a delayed echo of P&G's earlier strategic simplification. The question investors are asking is whether Unilever can close the gap — or whether structural differences in portfolio composition and geographic mix make parity unrealistic. Nestlé's recent strategic shift toward higher-growth nutrition and health categories — including pet care and medical nutrition — has reduced direct overlap with Unilever in some areas, but the competition in core emerging-market food categories remains fierce. Perhaps the most structurally significant competitive threat Unilever faces in developed markets is the continued sophistication and growth of retailer private-label programs. When Unilever took double-digit price increases in 2022-2023, it accelerated private-label trial among consumers who had previously never considered a store-brand alternative to Hellmann's or Dove. Unilever sold a 34.5 percent stake in its tea business to CVC Capital Partners in 2022, retaining 65.5 percent of the ekaterra joint venture, but subsequently announced plans to explore options for the remaining stake — reflecting an acknowledgment that the tea business does not fit cleanly into Unilever's future strategic identity. Unilever's financial trajectory in 2024 reflected the early stages of a credible turnaround under the Growth Action Plan. Full-year 2024 turnover was approximately 60.1 billion euros, with underlying sales growth of 4.2 percent — representing a healthier composition of approximately 2.9 percent volume growth and 1.3 percent price growth, compared to the inverted mix of 2022-2023 when price growth exceeded 10 percent and volumes were declining. By segment, Beauty and Wellbeing delivered underlying sales growth of approximately 5.8 percent, making it the fastest-growing division. Unilever's balance sheet carried net debt of approximately 21.2 billion euros at year-end 2024, reflecting the company's acquisition history and ongoing investment needs. Unilever faces a constellation of structural and cyclical challenges that collectively explain why one of the world's best-known consumer goods companies has spent much of the 2020s under intense investor scrutiny and management transition. The company's underlying volume growth in 2022 was negative 1.6 percent, improving to flat in 2023 and recovering to approximately 2.9 percent in 2024 as price growth moderated to approximately 1.3 percent. In emerging markets — which account for approximately 57 percent of Unilever's total turnover — the company faces growing competitive pressure from nimble, cost-efficient local and regional brands that are increasingly sophisticated in their marketing and product formulation. The transaction costs, potential tax liabilities, and management bandwidth consumed by the separation could distract from the core Growth Action Plan execution. Additionally, whichever structure the company ultimately chooses for the separation — IPO, spin-off, or trade sale — introduces uncertainty for employees, suppliers, and retail partners associated with the ice cream brands. Unilever's durable competitive advantages are not easily replicated and represent the accumulated product of nearly a century of investment, relationship-building, and operational learning. Dove's 'Real Beauty' campaign, launched in 2004, is consistently cited as one of the most effective brand-building initiatives in consumer goods history. Unilever's Growth Action Plan, announced in October 2023, represents the most significant strategic reset the company has undertaken in more than a decade. Its five pillars are: accelerating growth of the thirty Power Brands, winning in the United States and India, stepping up innovation, improving execution and speed, and reshaping the portfolio. The decision to concentrate resources on thirty Power Brands — and to accelerate the pruning or divesting of the remaining roughly 370 brands — is the centerpiece of the growth strategy. Power Brands receive increased marketing investment, dedicated innovation pipelines, and senior management accountability through brand-specific P&L structures. Management has identified the United States and India as the two markets that will disproportionately determine Unilever's long-term growth trajectory. In the US, the focus is on regaining market share in mayonnaise (Hellmann's), building the prestige beauty portfolio (Dermalogica, Paula's Choice), and expanding distribution in the growing drug channel. In India, Hindustan Unilever's strategy centers on urban premiumization — as Indian middle-class consumers upgrade to higher-priced product variants — while defending its rural market leadership through sachet offerings and kirana store penetration. **Innovation Investment** Unilever's forward-looking narrative is shaped primarily by three forces: the completion of the ice cream separation, the continued execution of the Growth Action Plan, and the macro consumer environment in key emerging markets. Management has indicated that proceeds from any sale or the separate listing of the ice cream business could be used for additional shareholder returns or bolt-on acquisitions in higher-growth categories. The separation also allows Unilever to sharpen its operational focus and reduce structural complexity. Longer term, Unilever's most significant growth opportunity lies in the continued development of emerging market consumer classes — particularly in Africa, Southeast Asia, and South Asia. Young William joined his father's grocery business as a teenager and displayed almost immediately an unusual aptitude for merchandising and brand-building at a time when most soap was sold in unbranded bulk quantities. Within a decade, Lever Brothers was one of the largest soap manufacturers in the world, having expanded to markets across the British Empire, the United States, and continental Europe. Across the North Sea in the Netherlands, a different family was building a different kind of business. The experience of those early years shaped a corporate culture that placed enormous emphasis on cash generation, operational efficiency, and geographic diversification — a cultural inheritance still visible in Unilever's strategic priorities nearly a century later.