Unilever Net Falls as Shoppers Buy Cheaper

Updated from 2:29 a.m. EDT

Consumer goods maker Unilever (UL Quote) said first-quarter earnings fell to 803 million euros ($1.1 billion) as shoppers in Western Europe reached for cheaper brands.

Sales fell 1% in the quarter to 9.5 billion euros, the maker of Lipton teas and Knorr soups said in a statement Thursday.

Unilever said underlying sales growth in the quarter was 4.8%, with 6.8% coming from carry-over pricing and volumes lower by 1.8%.

The company said it saw double-digit growth in developing and emerging markets, improved performance in the U.S., while underlying sales were down in Western Europe in "continued challenging market conditions."

"Market growth has been more affected by the global economic downturn than the rest of the world, and slowed further," in Western Europe, the company said. "There has been some down-trading to private label brands."

The results were "solid given today's trading environment" said CEO Paul Polman, who took the top job at the company in January.

He said the company planned to restore growth in sales volumes by advertising, but wouldn't sacrifice margins.

Unilever has invested heavily in promoting its top brands and sales of individual products rose.

The company said sales of its spreads and dressings -- such as Knorr and Hellmann's mayonnaise -- increased by 2.9%.

Sales of ice cream, including Ben & Jerry's and Magnum, were up 4.3%, while sales of personal care products such as Dove soaps, Axe deodorants and Vaseline, were up 4%.