UN Unilever NV

Consumer goods giant Unilever NV (UN) aims to grow its sales in Western Europe this year more than the overall market expands there, by launching new products and keeping tight controls on costs, its top manager for the region said in an interview.

"We expect to outperform the market in both volume growth and value share growth," Doug Baillie, Unilever's Chief Executive for Western Europe, told Dow Jones Newswires, adding that innovations are the main driver behind this growth.

Anglo-Dutch Unilever, the world's third largest consumer goods group measured by sales, expects to achieve that despite the likelihood that trading conditions in European markets, seen as its toughest region, will remain difficult.

"We want to bring 25 big innovations to the European market in 2010 and roll them out faster and to more markets than we did before," said Baillie, who started his career at Unilever in South Africa in 1978 and took the job as regional CEO for Western Europe two years ago.

The food, household and personal care group believes it can successfully attract demanding but price sensitive customers and as well as capitalize on a deceleration in growth of private label products.

When Unilever Chief Executive Paul Polman took the job of CEO last year, he said Western Europe will be managed for volume growth, rather than profitability--a move welcomed by the market which has criticized the company for being too focused on profit margins while investments in volume growth lagged. Analysts say much of Polman's success will depend on whether he manages to get Europe back to consistent quality growth.

But the company will face stiff competition from rivals who are also looking to lure consumers with new products.

Peer Reckitt Benckiser Group PLC (RB.LN) recently announced a 13% rise in sales in 2009, mainly driven by innovations such as a hands-free-soap-dispenser. The U.K.-based company said between 35% and 40% of sales come from innovations it introduced in the three preceding years.

Globally, Unilever, the maker of brands such as Ben&Jerry's ice cream, Lipton tea and Dove soap, expects to double turnover from the top 30 innovations in 2010 with innovations generating 30% of sales in the past eight quarters.

ING analyst Marco Gulpers said Unilever has an advantage over competitors as they are leading in most product categories, which makes it more likely retailers will put their innovations on the shelves.

Unilever's innovation pipeline ranges from re-launches of existing products to the introduction of new products such as an anti-ageing toothpaste, under its Signal brand, or a new moisturizing shower gel under its Dove brand.

Unilever declined to disclose when and in how many markets it will roll out its 25 innovations in 2010. It rolled out its new Dove for men, an innovation from 2009, in 6 markets simultaneously in the fourth quarter of last year whereby it will be available in 50 markets at the end of 2010.

The ING analyst said a faster roll-out is important to stay ahead of competition from vendors of own-store private label products who will be quick to launch the same offering under their own brand.

In the past, Unilever's innovations were much more fragmented, said Gulpers. "Now, they are able to push promotional spend behind a few big launches more efficiently."

Unilever's Baillie believes consumers are willing to pay more for new products despite the uncertain economic climate. "Consumers are trading down from dentists. Instead of going for a whitening treatment at the dentist, they buy a premium whitening toothpaste," said Baillie. "If you get the price right, bring innovation and support it with advertising, you can grow your volumes in a recession."

In line with last year's spike, Unilever intends to significantly increase its advertising and promotional spend in 2010 while remaining aggressive on cost savings.

Ensuring the availability of a portfolio of brands at different price levels across categories also helped boost volumes in 2009. Baillie said the acquisition of the personal care brands of Sara Lee last year, a deal which will be finalized this year, helped them fill in the last gaps in its product portfolio across Europe.

Unilever also hopes to cash in on the apparent waning growth of private label brands, a segment which is most developed in Europe.

"We have seen an accelerated growth of private label in the 2008/2009 period but in the last three months, with the exception of Southern Europe, the market shares of private labels have come down," Baillie said, adding it was price more than anything else that fuelled the growth of private label. "Now that commodity costs have come down, the price gap between branded goods and private label narrowed."

Volumes could also get a boost from a better availability of products at the retailer's shelves.

"Across Europe, the on-shelf availability at retailers is approximately 90%, which offers massive opportunities for improvement through better stock management at suppliers or preventing truck break-downs," Baillie said.

By Anna Marij van der Meulen; Dow Jones Newswires, +31-20-5715 201; annamarij.vandermeulen@dowjones.com

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