New innovations in deodorant and hair care, along with a new range and marketing direction for its AXE brand, helped propel Unilever PLC's personal-care sales during the first fiscal quarter.

In earnings reported April 14, the Anglo-Dutch firm said its personal-care division recorded revenue of €4.8bn ($5.4bn) in Q1, flat on a reported basis with the same period last year. However, underlying sales growth, excluding the impact of currency fluctuations, was 5.8% in the division.

Unilever said in a same-day trading statement that its new innovations not only drove personal-care sales, but also extended some of its brands into more premium segments.

In a call with analysts, CFO Graeme Pitkethly noted that in North America in particular the firm captured share in the deodorant and hair categories.

TRESemme Beauty-Full Volume is a reverse-wash system in which users apply conditioner first to soften hair and shampoo second "to wash away weight," according to the company's February release announcing the launch.

He attributed the gains to dry spray deodorants that launched in late 2014 to the US market under the Dove, Degree and AXE brands, which contain no water or alcohol and feature a “precision-designed actuator” for a unique soft spray that “goes on instantly dry without the sticky or wet sensation often associated with other antiperspirants" ([A#02141124005]).

Andrew Stephen, head of investor relations, offered perspective: "They continue to drive overall category growth, with more and more consumers switching to this more appealing and higher-margin segment. And they're helping us further widen our market leadership."

Meanwhile, the new AXE Advanced Collection and corresponding ad campaign that launched in January has been well received and has "open[ed] the brand to a broader audience," the firm says.

Called "Find Your Magic," the campaign encourages men to celebrate their individuality, a marked departure from the brand's foundational advertising that touted AXE products as a means of attracting women Also see "The Evolution Of Unilever's AXE: From Babe Magnet To Personal Guru" - HBW Insight, 13 January, 2016..

The campaign "appeals to a more mature and more sophisticated audience and broadens the emphasis across a range of male grooming products," Stephen explained.

"So, for the men listening, if you haven't seen the advertising or tried the new products that are just coming out, I encourage you to do so, even if, like me, you're slightly older and thought that your AXE or Lynx days were behind you."

The exec also said a recently introduced hair system, TRESemme Beauty-Full Volume, which he called "literally revolutionary," was a standout performer for Unilever in the quarter.

Beauty-Full Volume is a reverse-wash system in which users apply conditioner first to soften hair and shampoo second "to wash away weight," according to the company's February release announcing the launch.

"This leaves the hair residue-free, which means it's lighter and has more volume," Stephen said.

The innovation ensures that "women will no longer need to sacrifice softness for stiffness or lift for limp locks," according to Unilever, which is supporting the launch with a "robust" print/digital marketing plan, including videos on the firm's YouTube channel featuring model and television host Chrissy Teigen.

The videos "showcase the common compromise women inevitably make when trying to achieve volume: hair looks great, but too often feels crunchy, stiff or sticky – definitely not touchable," Unilever says.

The full Beauty-Full Volume line comprises conditioner, shampoo, hair maximizer, mousse and hairspray, priced at around $5 each at mass retailers.

The reverse-wash system may be TRESemme's effort to win consumers seeking novel approaches to familiar hair problems at a time of rising interest in co-washing, a technique in which consumers avoid shampoo and rely solely on conditioner to cleanse hair ([A#02140630008]).

Currency Effects Weigh On Results

Overall in the first quarter, Unilever's sales slipped 2% to €12.5bn ($14.1bn), reflecting a negative currency impact of 7.1%. Half of the currency impact was attributed to a weak Brazilian real and devaluations in Argentina.

The firm recorded underlying sales growth of 4.7%.

During the call, Pitkethly discussed consumer polarization in some markets that has posed challenges for the firm.

In Europe, there's a "very value-conscious consumer looking to save money but also trade up and treat themselves" as part of their daily and weekly shopping, he said.

The phenomenon isn't limited to developed markets, the exec noted. Pockets of consumers in emerging markets also are trading up and down.

The seesawing consumer makes for a "very challenging market backdrop," according to Pitkethly, but Unilever's broad portfolio is helping the firm reach consumers whichever way they swing.

According to the CFO, Unilever is on track to deliver top-line growth in the range of 3% to 5% for the year, and the firm expects to maintain "steady" margin improvement.

"We believe [Unilever's] scale and financial flexibility provide it with defenses against threats from e-commerce platforms' hard discounters and shifting consumer preferences," Morningstar analyst Philip Gorham says in an April 14 note.

He highlighted the firm's 8.3% underlying growth in emerging markets – which account for nearly 60% of its overall business – as a positive for Unilever at a time when growth in established markets such as Europe has slowed.

Palm Oil Supply In Question

During the call, management did not discuss its plans for sourcing palm oil following the suspension of supplier IOI Group from the Roundtable on Sustainable Palm Oil.

The Malaysia-based firm's membership was suspended due to failure to comply with RSPO standards, specifically relating to deforestation and peatland clearance.

IOI says in a March 31 statement that the action stemmed from a year-old complaint and that it has "taken corrective actions to review and enhance our sustainability practices" with measures including rehabilitating affected areas, improving its firefighting capabilities and hiring consultants to advise the firm on relevant regulations.

Moreover, the firm says it submitted an action plan to RSPO and will work to address outstanding issues.

Unilever announced the day before that IOI's suspension from RSPO puts the supplier in breach of its policy.

"In line with our grievance procedure, we are now in the process of disengaging with the supplier and have set a time-bound plan to do this over the next three months," Unilever says.

At the same time, Unilever is working together with IOI, NGOs and other stakeholders to find a way for IOI to resolve concerns and demonstrate its commitment to sustainable palm-oil development.

"We believe that this is a critical step in leading industry transformation," Unilever states.

Unilever Q1 Benefits From Dry Spray Deodorant Uptake, Reverse-Wash TRESemme

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