Threats from digital disruption and valuations were driving these worries, Train said in the investment trust’s February factsheet.
However, the global equities manager said he was encouraged by signals from consumer companies in the year to date, even though portfolio holdings threw up mixed returns over the month.
While the FTSE All Share has risen 6.6% in the year to the end of February, Unilever fell 2.5% and Diageo lagged with a 4% return. However, Train pointed out Remy Cointreau, Heineken and Mondelez returned between 16% and 18%, while Burberry rose 9%.
Hawkish on Dove
Train used soap brand Dove to highlight why he continued to back Unilever, which he described as the trust holding “most challenged by changes in consumer tastes because it has the most mass or mid-market brands”.
Dove’s revenues are up 84% over the last decade and have accelerated over the last seven years, he said. “In fact, Dove, established in 1957, sells more and is almost certainly more valuable as we get toward the end of the second decade of the 21st century than any other time in its history.”
Rising wealth in emerging markets was also boosting Unilever, he said.
Its sales in Asia grew 6% in 2018, while India and China led 4% growth in its home care division.
Meanwhile, Unilever management could learn about digital disruption and how quickly the world can change through its Dollar Shave Club brand, which it bought in 2016 and that grew at double digits in 2018.
Gin boom, Oreos and beer
Train’s examples of consumer brands continuing to grow was not limited to soap.
The “global gin boom” had prompted 20% growth at Diageo brand Tanquerey, while Johnnie Walker was up 10% over the period and Heineken’s eponymous brand grew 7.7% – it’s best rate for a decade. Remy Cointreau’s cognacs, Oreos and Cadbury chocolate were also highlighted for their strong growth in the factsheet.
He said: “I know I’m cherry-picking statistics here and that all these companies have portfolios of brands, for some of which trends may not be so encouraging. But already here is a formidable counter-argument to the proposition that big brands are doomed in the 21st century.”
In February, the trust’s share price rose 3.5%, higher than the 3.1% rise in the net asset value and outperforming the FTSE All Share returns of 2.3%.