How to do well in a recession

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They call it the ‘lipstick index’: the term coined by makeup giant Estee Lauder to describe the increase in sales of cosmetics during a recession.

Women, so the theory goes, substitute more expensive purchases like dresses and shoes for lipstick in times of economic distress.

Given recent profit reports, perhaps the term could also be extended to include tea and ice cream.

It’s certainly the case for consumer products company Unilever NV. The maker of Lipton teas, Ben & Jerry’s ice cream and Dove soap recently posted a 15 per cent increase in earnings for its fourth quarter thanks to strong sales in emerging markets – even as margins were impacted by rising costs of raw materials.

According to Unilever’s chief executive Paul Polman, net profit was €955 million ($1.32 billion), up from €831 million. Sales rose by 12 per cent to €18.8 billion.

“Underlying profit margins slipped by 0.2 per cent, as we were unable to fully pass on rising commodities costs to struggling consumers," Polman was reported as saying.With sales prices flat, increased raw materials costs outweighed savings from restructuring and cuts on advertising."

The world’s third largest consumer products maker predicts that this year the total input cost of inflation will be “around four per cent of total turnover”.

Polman says the company will absorb that increase by a combination of hiking prices and further cutting costs, and argues that commodity price increases will cripple the company’s cheaper competitors.

Unilever’s fourth quarter sales volumes increased in all regions, though prices were, on balance, flat. Profit margins increased in Europe due to cost cutting, but it wasn’t enough to outweigh margin falls in North and South America, Asia and Africa.

The continuation of price falls in Europe “reflected the high levels of promotional intensity in many of our markets,” the company claimed.

Boosting net sales was the acquisition of the personal care business of Sara Lee while ice creams and beverages were the company’s strongest category – including the introduction of the Magnum brand to Indonesia and the growth of Klondike in the US.

Profit margins – and how technology can contribute to the bottom line – is likely to be top of mind at the CIO Summit Europe 2011, which takes place at the Ritz Carlton in Berlin from 24-26 May 2011.

This closed-door summit, hosted by GDS International, also features some of the leading voices in the European including Neil Dyke, GE Corporate CIO for Europe, the Middle East and Africa (EMEA), Sauro Nicli group CIO of AXA, Patrick Vandenberghe group CIO of ArcelorMittal, and Michael Terhorst BP's CIO of Europe & Africa FVC.

Along with information security, other key topics for discussion include the role of IT in social media, enterprise mobility, data centre optimisation and maximising enterprise IT security protection.

The CIO Summit Europe 2011 is an exclusive C-level event reserved for 100 participants that includes expert workshops, facilitated roundtables, peer-to-peer networks and co-ordinated meetings.

For more information visit www.ciosummiteurope.com.

GDS International is a business-to-business events company. It offers financial, healthcare, IT service management, telecoms and oil and gas summits for senior executives throughout the Asia Pacific, Africa, China, Europe, North America and Russia markets. For more information, visit www.gdsinternational.com

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