Unilever (ULVR) is often touted as a reliable long-term investment because it sells well known brands of everyday items that people buy regularly. It is also seen as a play on economic growth in emerging markets. There is some truth in this but I have held a lukewarm view on the business for a while now.
I think the company has been run on a private equity business model for the last couple of years with cash returns to shareholders taking precedence over new product innovation and customer engagement. I think its brands are also very vulnerable to substitution by rapidly improving private label products and niche local brands.
These weaknesses have been reflected in fairly lacklustre revenue growth rates before the coronavirus appeared. Thursday’s first quarter trading update showed that the business continues to face big challenges.
Also in this week's round-up I look at challenges Fevertree Drinks (FEVR) faces to grow at a rate to justify the still lofty valuation of its shares and I highlight some important comments from Associated British Foods (ABF) about its Primark business, which investors banking on a V-shaped recovery should heed.
There are also changes to my Fantasy Sipp and UK Quality Shares fantasy portfolios, as I reassess which shares of quality businesses look to offer reasonable value.
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