Unilever : Overview

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Unilever


Industry Area: Branded and packaged goods including foods and home and personal care products.

Overview

Market share/importance:

Unilever’s mission statement is ‘meeting the everyday needs of people everywhere’, and the multinational definitely has a huge and expanding global reach. Unilever proudly declares that every day 150 million people are choosing their brands ‘to feed their families and clean their homes’. Unilever is one of the world’s top makers of packaged consumer goods and moves countless products like deodorants, fragrances, soap, margarine, tea and frozen foods all over the world. The corporation sells products in over 150 countries and has annual sales of approximately $ 46 billion (£31,5bn). Unilever controls subsidiaries in at least 90 countries and employs 295,000 (in 2000) people [1]. Unilever is one of the world’s top three food firms -after Nestle and Kraft- and the world’s second largest packaged consumer goods company –behind Procter & Gamble.

However, in spite of Unilever’s vast size and presence worldwide, the company’s actual visibility is surprisingly low. Anonymity hides the company’s importance. Unilever does not retail under its own name, preferring brand names to create the illusion of diversity. Who does not know brand names like Magnum, Omo, Dove, Knorr, Ben & Jerry’s, Lipton, Slim-Fast, Iglo, Unox, Becel, and Lever2000? They’re all part of the ‘Unilever armada of brand names’. To make sure the brand names do not go unnoticed, Unilever spends huge amounts of money on marketing and advertising. Advertising has always been a keystone of Unilever’s businesses. The Dutch-Anglo company is likely to be the world’s number one advertiser. (Advertising Age estimate a 1999 global media spend of $3.7bn (£2,539bn), of which $3.1bn (£2,127bn) was outside the US, making Unilever the world's #1 advertiser)[2].

History:

Butter & Soap

Unilever was formed in 1930 when the Dutch margarine company Margarine Unie merged with British soapmaker Lever Brothers. Both companies were competing for the same raw materials (e.g. oilseeds), both were involved in large-scale marketing of household products and both used similar distribution channels. Between them, they had operations in over 40 countries. Margarine Unie grew through mergers with others margarine companies in the 1920s. Lever Brothers was founded in 1885 by William Hesketh Lever. Lever established soap factories around the world, and had plantations in many Third World countries. In 1917, Lever began to diversify into foods, acquiring fish, ice cream and canned foods businesses.

Control of the supply chain

In Unilever one activity has frequently led to another. The oil seeds crushed for use in margarine and soap yielded a by-product known as "cattle cake" which prompted a move into animal feeds. Processing the oil for use in margarine and soap yields other by-products, glycerine and fatty acids, which led Unilever into chemicals, a $2-billion (£1,372bn) business in 1986. (In 1997 Unilever sold its speciality chemicals business to Imperial Chemical Industries (ICI) for US$8bn (£5,489bn) Those millions of consumer products need to be packaged, which resulted in Unilever operating twenty-four packaging plants in six European countries. Consumer goods must also be transported, which turned Unilever into one of the largest truckers in Britain - and for fifty years, before it was sold in 1985, the Unilever-owned Palm Line was one of the biggest shipping companies out of West Africa.

Fishing is another area of interest. Unilever farms for salmon in Scotland, has prawn farms in several Asian countries, and is the major owner of a vertically integrated fishing business out of West Germany that includes catching the fish in deep-sea trawlers, processing the catch, and then selling the fish in company-owned shops and restaurants that carry the Nordsee name. Unilever made a public commitment to move towards buying all its fish from sustainable fisheries by 2005. To meet this objective Unilever and the World Wide Fund for Nature (WWF) jointly set up the Marine Stewardship Council (MSC) as a platform to promote sustainable fishing internationally (1996). The MSC is now said to be an ‘independent, non-profit body with a set of principles and criteria for sustainable fishing’.

Recent acquisitions

Major acquisitions during the 80s included Brooke Bond in 1984, greatly strengthening the Unilever’s tea interests, while Chesebrough-Pond’s Inc, in 1987, brought a major additional stake in the US personal product market, as well as strengthening Unilever’s position in the world skin care market.

(Unilever has been considered a ‘sleeping giant’ for a long time, especially during the 80s. In the 90s Unilever tried to shake this image as a ‘cumbersome, inflexible corporation’ off.) Again, in the 90s, there were numerous acquisitions, and Unilever began to put into effect its planned moves into Eastern Europe. However, the company largely withdrew itself from packaging and all agricultural operations, apart from Plant Breeding International Cambridge (R&D based company developing products (in the agriculture and horticultural sector) mainly under license, sold to Monsanto in 1998] and the plantations. Much of the company’s agribusiness assets were sold as part of the company’s policy to focus on its core activities.

Strategy

In September 1999 Unilever announced its intention to focus on fewer, stronger brands to promote faster growth. The company is whittling its brands down to 400 (from 1,600) including familiar brands such as Dove, Lux, Lipton, Magnum and Calvin Klein fragrances. (Consulting firm PricewaterhouseCoopers has been hired by Unilever to sell off ten of the firm’s 70 food brands) [3].

The concentration on innovation and brand development on a focussed portfolio of 400 leading brands is part of Unilever’s latest growth strategy, called ‘The Path to Growth’, designed to accelerate top line growth and step up the rate of margin improvement in five years time. In February 2000 the company announced a series of linked initiatives (organizational changes, restructuring) to align the entire organization behind these growth ambitions.

The shake-up of its top management, splitting the company into two, separate global units –food and home, and personal care-- was one of these initiatives. And Unilever has started selling off any subsidiary businesses which are making less than average profits, and ‘decentralising’ control of subsidiaries, with the corporate HQ in Europe just monitoring profit levels – and making sure they are maximised. This heavy focus on profit means cost-cutting - especially minimising workers’ pay.

Another key component of the growth strategy is e-commerce. Unilever wants to step up the use of the Internet in order ‘to improve brand communication/marketing and on-line selling & to simplify business-to-business transactions throughout the supply chain’. India’s Satyam Computer Services Ltd has recently won an information technology services contract from Unilever [4]. Unilever also made deals with Compaq, IBM, Microsoft, Excite@Home, Ariba Inc. (leader in all phases of business-to-business e-commerce) and WOWGO to enable a faster adoption of global e-commerce opportunities. In February 2000, Unilever and iVillage formed a new Internet company. Unilever committed £130 million to e-business initiatives in 2000 and hopes to create a ‘mall that never closes’.

In its bid to concentrate on fewer, core brands, Unilever disposed of 27 businesses during 2000 for a consideration of approximately $642 million (£404,7 million). The company sold, amongst others, the European Bakery Business, Benedicta a culinary business in France and various other small businesses and brands. The same year, Unilever acquired several high-profile companies, including American based Bestfoods, which strengthened Unilever’s market position remarkably. Other important acquisitions were Groupo Cressida Central America Foods (Home & Personal Care) Corporation JABONERIA NA (Ecuador, Foods, Home & Personal Care), Amora Maille (France, Culinary Products) Codepar/SPCD (Tunisia, Home & Personal Care), Ben & Jerry's (USA, Ice Cream), and SlimoFast (USA, Slimming Products). The total purchase consideration for businesses other than Bestfoods (total number: nineteen) was approximately $4,451 million (£2,8 million) [5]. The acquisition of Bestfoods made Unilever's foods business the world's second largest after Nestle.

Unilever keeps selling businesses. In 2002, Unilever sold at least 19 of its food brands including cleaning firm DiverseyLever and cooking oil firm Mazola. Brands that are here to stay include Hellmann’s mayonnaise, Bird’s Eye, Persil, and Ben & Jerry’s ice cream. On these brands Unilever will focus its tremendous advertising efforts. The company has closed several big advertising deals on airtime with Carlton and Granada. Also, Unilever struck a massive deal with billboards company JCDecaux, the biggest poster contractor in Europe. The French firm will handle all Unilever’s poster advertising across 22 European countries for the next five years.

Outlook

Views on Unilever’s performance vary. On 28 August 2001, Credit Suisse First Boston (CSFB) downgraded Unilever from a "hold" to a "sell" rating, highlighting analysts’ and investors’ concerns about the performance of Unilever and the integration of Bestfoods [6]. Unilever, on the other hand, is optimistic, saying it saw sales rise 35% by June (2001) and that estimated annual savings of US$32m [£21,9m] will result form the acquisition [7]. Talking to The Guardian (August 4, 2001) Finance director Rudy Markham played down slowdown fears: 'The economic outlook is gloomier than at the start of the year but we are continuing to motor comfortably' [8].

More on Unilever's history: see section four (corporate crimes, paragraphs on Africa and Central and Eastern Europe) of this document.

Unilever’s CEO Niall Fitzgerald, the UK’s unofficial promoter of the European single currency, hopes his company will benefit from the introduction of the Euro in the near future. Also, Unilever aims at enhancing its green image. The company is considering branding some of its products, such as Persil (‘Persil from Unilever’) and Ben & Jerry’s, under its own name. The idea is to create consumer-friendly brand values - such as a commitment to the environment - for Unilever to use when marketing its products.


References

[1] www.unilever.com (source: Unilever, date viewed: 20/9/01)

[2] www.mind-advertising.com/nl/unilever_nl.htm (source: mind advertising profiles, date viewed:19/8/01)

[3] http://just-food.com/news_detail.asp?art=41678&dm=yes (source: just-food.com editorial team, date viewed: 19/8/01)

[4] http://just-food.com/news_detail.asp?art=41041&dm=yes&c=1 (source: just-food.com editorial team, date viewed: 18/9/01)

[5] www.unilever.com (source: Unilever, date viewed: 19/9/01)

[6] ‘Unilever downgraded on concerns over Bestfoods’ artificial sales growth’, 29 August 2001, by just-food.com

[7] http://just-food.com/news_detail.asp?art=41678&dm=yes (source: just-food.com editorial team, date viewed: 19/8/01)

[8] ‘Bestfoods buy boosts Unilever’, The Guardian (August 4, 2001)