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.
