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 Diversey Lever 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.
Harland David Sanders was born September 9, 1890 in Indiana, USA. The
young Harland Sanders had many jobs such as a farmhand, a bus
conductor, a steam boat driver, a soldier, and a salesman.
Eventually he became a business man owning a petrol service station
in Kentucky, one of the 52 states of the USA.
