---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 194912
conversation_id: 47893c52-d410-4abd-a907-c1ca084784f4
citations: 11
created: 2026-05-31 22:10:44Z
---

# What are the key risks to Unilever Indo’s growth trajectory?

# Key Risks to Unilever Indonesia's (UNVR IJ) Growth Trajectory

UNVR is in the middle of a multi-year transformation under new management (price harmonisation completed in 4Q24, customer stock reduction completed in 1Q25, ~50% reduction since 2021) [2][6][11]. CLSA rates the stock **HOLD** with a TP of **Rp1,400** (15.5x 25CL EPS, ~2 standard deviations below the 5-year average multiple) — signalling that the recovery path is fragile and that several distinct risks could derail re-rating [3][4]. Internal CLSA research (Jennifer Widjaja / Nicholas Mulyono, Jakarta) flags six categories of risk:

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## 1. Downtrading / Weaker Consumer Purchasing Power
UNVR's product portfolio is priced "at quite a premium vs peers" — making it disproportionately exposed if Indonesian consumers continue to trade down to cheaper local brands [1][2]. CLSA's June 2025 Indonesia consumer survey found that the **downtrading trend is "atypical" — observed across ALL market segments, not just lower-end**: lower-income households downtrade, while higher-income households *reduce usage*, both of which structurally hurt a premium-positioned HPC player [9]. UNVR was explicitly singled out as the only large HPC player whose aggregate sales were NOT improving in the latest sector tracker — "We see positive aggregate sales of home personal care (HPC) categories across players, **except for Unilever (UNVR IJ, HLD)**" [8]. In the June note, CLSA's "Hold" stance is reiterated specifically due to the **"less essential nature of their product offerings"** vs staples peers [7].

## 2. Intensifying Local Competition (Market Share Erosion)
CLSA flags that *"continuously intensifying competition could continue to erode Unilever's market share in several segments (eg, personal care division)"* [1][2]. This is not a future risk — it has already shown up: value share fell from ~40%+ historically to **33.5% in 1Q25**, and volume share to **26.7%** (per the TOC of the Apr-25 note). CLSA explicitly cites competition (alongside boycotting) as **"structural factors that have been affecting demand"** — not cyclical — meaning the 25/26CL earnings cuts of 13% / 12% are partly a downward reset of structural assumptions [5].

## 3. Boycotting Risk (Geopolitical / Consumer Sentiment)
CLSA repeatedly cites **the boycott as an explicit risk to the recovery path**, in both Feb-25 and Apr-25 notes: *"The boycotting impact, though at a milder scale, is also another risk to its performance"* [3][4]. While management characterises the boycott as "milder," CLSA still bundles it with slow transformation as one of the two named drags justifying the deep multiple discount (15.5x vs historical >30x — see the PE compression from 40.5x in Feb-20 to 17.0x in Aug-24).

## 4. Rupiah / FX Volatility (Margin Risk)
**55–60% of UNVR's COGS components are USD-linked** [1][2]. Any IDR weakness flows directly into higher input costs. This is a quantitatively significant exposure — gross margin already compressed 210bps in FY24 and CLSA cut its 25/26CL gross margin forecasts by 80bps / 70bps in the Feb-25 update specifically reflecting weaker margin assumptions [11].

## 5. Commodity Price Swings — Crude Oil and CPO
CLSA cites *"fluctuations in commodity prices such as for oil and CPO also pose a risk to the company"* [1][2]. Oil feeds into surfactants/packaging across the HPC portfolio; CPO is a key input for soaps, detergents and food. UPG (Underlying Price Growth) of +1.3% in 1Q25 was already attributed in part to palm-oil cost passthrough — meaning input inflation is being managed through pricing, which compounds the downtrading risk above.

## 6. Execution Risk on the Transformation / "Long Journey" to Recovery
CLSA's valuation discount is explicitly tied to skepticism on transformation speed: *"the transformation strategies will take some time and the company still has a long journey to recover to where it was before"* [3][4]. The Apr-25 note adds two execution-specific worries: (a) **post-Eid seasonal normalisation in 2Q25** (CLSA expects ~10% QoQ sales drop), and (b) **softer purchasing power has not yet been fully factored in** — *"we are also yet to take into account the expectation of softer purchasing power and will watch for the sustainability of its cost efficiency initiatives"* [6].

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## Synthesis — How These Risks Interact

The risks are not independent. The dangerous combination is **(premium pricing) + (cross-segment downtrading) + (intensifying local competition)**. Even if the transformation programs are executed perfectly, top-line recovery depends on Indonesian purchasing power recovering AND consumers re-engaging with premium brands — both outside management's control. Meanwhile, the rupiah/commodity layer can compress margins simultaneously.

CLSA's quantification of the resulting earnings reset (Feb-25 update) [11]:

| Metric | 25CL Old | 25CL New | % Change |
|---|---|---|---|
| Revenue (Rp bn) | 36,568 | 35,495 | (2.9%) |
| Gross profit | 17,868 | 17,064 | (4.5%) |
| Gross margin | 48.9% | 48.1% | -80bps |
| EBIT | 5,273 | 4,622 | (12.3%) |
| EBIT margin | 14.4% | 13.0% | -140bps |
| Net profit | 4,078 | 3,534 | (13.3%) |
| Net margin | 11.2% | 10.0% | -120bps |

The PE de-rating from 18.5x to 15.5x (below -2 std dev of the 5-yr average) is the analyst's way of saying these risks remain unresolved enough to keep the multiple structurally compressed [3][4]. The named **potential re-rating catalyst** is the opposite of the risk — *"any improvement in its performance, especially in volume and sales, could provide a potential rerating catalyst… as this might suggest the success of its transformation strategies"* [1][2].

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**Source coverage**: All risk attribution is sourced from CLSA's internal research archive (two dedicated Unilever Indo notes from Feb-25 and Apr-25, plus the June-25 Indonesia consumer sector note). Public-source corroboration via Manticore (UNVR interim_report chunks) was attempted but the targeted MATCH query on competition/boycott/market-share keywords returned zero hits — only general filing chunks were indexed, with no analyst-style risk discussion. The answer therefore relies on CLSA's coverage; for management's own framing of these risks, the UNVR FY24 annual report (when indexed) would be the next source to layer in.

---

**Sources**
[1] Unilever Indo - HLD (Challenging moments) — CLSA, 13 Feb 2025 — 607950575LinqAlpha.PDF (Investment risks paragraph)
[2] Unilever Indo - HLD (Holding steady) — CLSA, 24 Apr 2025 — 607956782LinqAlpha.PDF (Investment risks paragraph)
[3] Unilever Indo - HLD (Holding steady) — CLSA, 24 Apr 2025 — 607956782LinqAlpha.PDF (Valuation details, boycott risk)
[4] Unilever Indo - HLD (Challenging moments) — CLSA, 13 Feb 2025 — 607950575LinqAlpha.PDF (Valuation details, boycott risk)
[5] Unilever Indo - HLD (Challenging moments) — CLSA, 13 Feb 2025 — 607950575LinqAlpha.PDF (Upgrade to Hold; structural factors)
[6] Unilever Indo - HLD (Holding steady) — CLSA, 24 Apr 2025 — 607956782LinqAlpha.PDF (1Q25 results review; 2Q25 caution)
[7] Indonesia consumer (Needs over wants) — CLSA, 12 Jun 2025 — 607961903LinqAlpha.PDF (Less-essential product mix)
[8] Indonesia consumer (Needs over wants) — CLSA, 12 Jun 2025 — 607961903LinqAlpha.PDF (UNVR HPC under-performance)
[9] Indonesia consumer (Needs over wants) — CLSA, 12 Jun 2025 — 607961903LinqAlpha.PDF (Cross-segment downtrading)
[10] Unilever Indo - HLD (Challenging moments) — CLSA, 13 Feb 2025 — 607950575LinqAlpha.PDF (Valuation table — TP cut Rp1,980→Rp1,400)
[11] Unilever Indo - HLD (Challenging moments) — CLSA, 13 Feb 2025 — 607950575LinqAlpha.PDF (Summary of forecast changes table)

## Citations

- [1] **607950575LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607950575LinqAlpha.PDF>
- [2] **607956782LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956782LinqAlpha.PDF>
- [3] **607956782LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956782LinqAlpha.PDF>
- [4] **607950575LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607950575LinqAlpha.PDF>
- [5] **607950575LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607950575LinqAlpha.PDF>
- [6] **607956782LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956782LinqAlpha.PDF>
- [7] **607961903LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961903LinqAlpha.PDF>
- [8] **607961903LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961903LinqAlpha.PDF>
- [9] **607961903LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961903LinqAlpha.PDF>
- [10] **607950575LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607950575LinqAlpha.PDF>
- [11] **607950575LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607950575LinqAlpha.PDF>

