Dividend Prince Deep Dive: Unilever PLC (UL)

Unilever is a giant. Everyone knows their products

Source: provided by the author

The Business & The Moat (My Qualitative Score: 16/30)

Frankly, they are a machine when it comes to getting their stuff, from Dove soap to Hellmann’s mayo, into the hands of 3.4 billion people daily across 190 countries. This makes their revenue incredibly predictable, which is something I always look for. I also like that they aren’t just a developed-world story; a solid 58% of their sales comes from emerging markets. That’s good diversification.

For me, the company’s competitive moat comes down to one thing: brands. They have an incredible portfolio of them. They back this up with a massive €9.4 billion marketing spend and another €987 million in R&D, which keeps those names front and center.

But that’s where my praise for the moat ends.

I see no real switching costs here. None. A shopper can easily grab a competitor’s product off the shelf. And there’s certainly no network effect. So where’s the stickiness? Now, I see Morningstar calls this a ‘Wide’ moat, and I think I know why, they’re probably factoring in a cost advantage from Unilever’s sheer scale. My framework doesn’t account for that, and based on what I can score, their advantage rests solely on those brands. When I…