Unilever (UL) Q3 2025: Power Brands Drive 4.4% Growth as Premium Shift Accelerates
Unilever’s third quarter revealed a decisive tilt toward premiumization and digital commerce, with power brands delivering robust 4.4% growth and volume momentum accelerating outside of ice cream. Developed markets, particularly North America, posted standout volume-led gains, while emerging markets rebounded in Asia but remained pressured in Latin America. Management’s confidence in operational discipline and strategic focus on premium, digital, and core brands sets a clear trajectory for margin expansion and competitive outperformance into 2026.
Summary
- Premiumization and Portfolio Focus: Shift toward premium and core brands is driving volume and share gains in key markets.
- Emerging Market Divergence: Asia rebounded strongly, while Latin America faced macro and execution-related setbacks.
- Margin Expansion Commitment: Management signals ongoing cost discipline and brand investment to sustain margin growth into next year.
Performance Analysis
Unilever’s Q3 results underscored the company’s transformation agenda, with underlying sales growth of 3.9% and a notable acceleration in volume growth to 1.7% excluding ice cream. The company’s power brands, which account for over 75% of turnover, outperformed with 4.4% growth, highlighting the impact of focused brand investment and innovation. North America continued its multi-quarter streak of volume-led expansion, with 5.5% underlying sales growth driven by personal care and well-being categories.
Europe delivered positive sales growth despite a tough prior-year comparison, gaining share in home care and personal care. In Asia Pacific Africa, growth accelerated to 6.8% as Indonesia and China rebounded, reflecting improved execution and portfolio resets. Conversely, Latin America saw a 2.5% sales decline, with volume down 7.3%, as macro pressures and self-inflicted pricing missteps weighed on results. The foods and home care segments maintained steady growth, while beauty and well-being led with 5.1% sales growth, fueled by premium innovation and digital channel expansion.
- North America Volume Surge: Five consecutive quarters of robust volume-led growth, with well-being brands nearing $1B annual revenue.
- Asia Pacific Africa Recovery: Sequential improvements in Indonesia and China, with business resets and digital investments showing early payoff.
- Latin America Strain: Volume declines from aggressive pricing and macro headwinds, prompting corrective actions and a cautious 2026 outlook.
Currency headwinds and portfolio disposals offset underlying growth on reported turnover, but operational leverage and margin discipline remain central to the company’s financial narrative.
Executive Commentary
"Our anchor markets are delivering superior growth. Our U.S. business has now posted five consecutive quarters of strong volume-led growth. The performance expectations we are placing on people within the company are higher, with clear accountability and real differentiation in our incentive outcomes. And our commitment to make Unilever a marketing and sales machine permeates everything we are doing."
Fernando, Chief Executive Officer
"Given the work that we have done, whether it's in terms of the portfolio mix, the geography mix, the channel mix, or the format mix, mix is actually becoming a component which gives about 25 to 30 basis points on a regular basis for us. We are also really very focused on hard currency earnings because it's again a multi-year clear objective."
Srini Patak, Chief Financial Officer
Strategic Positioning
1. Power Brands and Portfolio Simplification
Unilever’s “power brands,” defined as its largest and most strategically supported brands, now represent over 75% of turnover and are targeted to reach 90-95% in key markets. This focus reduces complexity, channels investment into proven winners, and underpins the company’s volume and share gains in both developed and emerging markets.
2. Premiumization and Digital Commerce Acceleration
The pivot to premium products and digital channels is reshaping Unilever’s growth model. Premium innovations in beauty, well-being, and personal care are outpacing legacy categories, while digital commerce now generates 17% of revenue, with even higher penetration in beauty and well-being. E-commerce growth rates are robust across platforms, with TikTok commerce up 70% and Amazon up 15%.
3. Market-Specific Execution and Learning
Execution discipline is evident in the company’s rapid response to setbacks in Latin America and its tailored resets in Indonesia and China. In Brazil, pricing corrections and innovation (such as the rollout of Wonder Wash) are restoring competitiveness, while in Asia, leadership renewal and channel strategy are driving a return to growth.
4. Margin Expansion and Cost Control
Margin discipline is underpinned by multi-year productivity programs, supply chain optimization, and targeted capital allocation. The company is leveraging mix, operational savings, and below-the-line levers (tax, interest, pensions) to sustain margin growth, with a clear focus on hard currency earnings and reinvestment in brand building.
5. Ice Cream Demerger and Capital Structure
The planned demerger of the ice cream business is on track for 2025, with technical share consolidation ensuring continuity for shareholders. This move is expected to enhance margin profile and sharpen Unilever’s focus on its core premium and personal care businesses.
Key Considerations
This quarter’s results highlight Unilever’s transformation into a leaner, more premium-focused, and digitally enabled consumer goods company. Strategic clarity and operational discipline are evident, but execution risks remain in volatile markets.
Key Considerations:
- Premium and Digital Channel Momentum: Sustained double-digit growth in premium brands and digital commerce is reshaping category economics and competitive dynamics.
- Emerging Market Volatility: While Asia is recovering, Latin America’s macro headwinds and pricing missteps underscore execution risk and the need for local agility.
- Margin Expansion Levers: Productivity gains, mix improvements, and supply chain initiatives are supporting margin growth, but wage inflation and commodity volatility (notably palm oil and aluminum) require ongoing vigilance.
- Portfolio Rationalization: The focus on eight core power brands in key markets simplifies operations and drives brand investment, but may create temporary headwinds for local brands not prioritized for support.
- Ice Cream Demerger Impact: The separation of the lower-margin ice cream business will clarify Unilever’s core margin profile and capital allocation priorities.
Risks
Macro uncertainty in Latin America, currency volatility, and commodity inflation (especially palm oil and aluminum) remain material risks to margin and volume growth. Execution missteps, particularly in pricing and channel management, could dampen recovery in challenged markets. The ice cream demerger introduces transitional complexity, though management signals strong operational readiness.
Forward Outlook
For Q4 2025, Unilever guided to:
- Underlying sales growth within the 3-5% multi-year range, with volume growth at least in line with Q3.
- Second-half operating margin of at least 18.5% (19.5% excluding ice cream).
For full-year 2025, management maintained guidance:
- Underlying sales growth of 3-5%.
- Improvement in underlying operating margin, with continued brand investment and productivity gains.
Management highlighted several factors that will shape performance:
- Continued premiumization and digital channel expansion as growth engines.
- Execution focus in emerging markets, with corrective actions and leadership renewals to drive recovery.
Takeaways
Unilever’s Q3 2025 results validate its strategic pivot to premiumization, digital commerce, and power brand concentration, with clear signals of volume-led growth and operational discipline in core markets.
- Developed Market Outperformance: North America and Europe are posting sustained share gains, validating the premium and digital strategy.
- Emerging Market Rebound and Risk: Asia’s improvement is offset by Latin America’s setbacks, emphasizing the importance of local adaptation and pricing discipline.
- Margin and Capital Discipline: Multi-year cost programs and supply chain optimization are supporting margin expansion, but commodity and wage inflation require ongoing management.
Conclusion
Unilever’s Q3 demonstrates the tangible benefits of its premium, digital, and power brand strategy, with developed markets leading and operational resets underway in challenged regions. Management’s confidence in outpacing market growth and sustaining margin improvement is supported by disciplined execution, though regional volatility and inflation risk remain watchpoints for 2026.
Industry Read-Through
Unilever’s results reinforce several sector-wide signals for global consumer goods: Premiumization and digital commerce are now essential growth drivers, with power brands and portfolio focus yielding operational leverage. Developed market resilience contrasts with emerging market volatility, requiring nuanced local execution and pricing agility. The ongoing shift to e-commerce and direct-to-consumer models, especially in beauty and well-being, points to accelerating channel disruption industry-wide. Finally, portfolio simplification and divestiture of lower-margin assets, as seen in the ice cream demerger, may become a template for peers seeking to sharpen strategic focus and improve margin quality.