UNILEVER A YEAR DOWN THE 'PATH': It has now been 12 months since the FMCG giant embarked on its five-year 'path to growth' strategy Harriet Marsh finds out whether a leaner Unilever is a stronger one.

Last week's news that Unilever had completed the pounds 200m agency realignment of its global food business was the latest stage of a fundamental shift in the FMCG giant's marketing strategy.

Last week's news that Unilever had completed the pounds 200m agency realignment of its global food business was the latest stage of a fundamental shift in the FMCG giant's marketing strategy.

The review, called after Unilever's pounds 14bn acquisition of Bestfoods last year, was hotly fought over as agency networks sought to retain or gain a place on the coveted roster.

In the end, BBDO and Ogilvy & Mather lost out completely, while Lowe Lintas, J Walter Thompson and DDB are all on the roster.

The decision was always going to be difficult with agencies having to avoid client conflicts throughout their global businesses. And with both Unilever and Bestfoods staff present at the credentials pitch, there were also internal politics to contend with.

The realignment was officially announced on Friday and there are now two major Unilever food accounts: dressings and savoury.

As part of a complex restructuring of the company's food business, the accounts will line up behind Hellmann's for dressings, which was won by Lowe Lintas, and Knorr for savoury, which will be handled by JWT and DDB.



Aggressive promotions

But while the review was one of the most fiercely contested in adland, it was just a small part of the change in strategy taking place at Unilever.

At the announcement of its annual results two weeks ago, chairman Niall FitzGerald donned an apron and brandished a frying pan to offer the press a demonstration of the company's latest brand launch in the UK, its quick-cook frozen meal range enjoy!, which is being sold under the Birds Eye brand.

The company is spending pounds 20m on enjoy!, making it the largest food launch in British retail history. Targeting affluent, time-strapped consumers, the range will be available in off-licences, video shops and petrol stations, as well as supermarkets.

Promoting the brand at the annual results demonstrates the company's belief that enjoy! is the embodiment of its future direction - aggressively funded and highly innovative.

Enjoy! is just one of 20 major initiatives Unilever has planned for 2001, and which it hopes will deliver about pounds 940m worth of business to provide the impetus for growth within its pared-down brand portfolio.

It is a brand that has evolved during a turbulent period in Unilever's fortunes. Originally launched two years ago in Italy under the brand name Quattro Salti in Padella, enjoy! was a success. But its name - whose closest interpretation is 'Four stars in the pan' - gave it unfortunate connotations with petrol and made it unsuitable for export across Europe until a new brand could be found.

While the product has since been launched in Germany as enjoy!, its laboured roll-out provides a typical example of why Unilever has been working hard to simplify and improve its business structure.

It is now a year since the company unveiled an ambitious five-year strategy, which it dubbed 'path to growth'. At the heart of its plans - which include a re-organisation of manufacturing and procurement activities - has been its intention to focus on fewer, stronger brands to promote faster growth.

This meant rationalising its 1600-strong brand portfolio to just 400 'power' brands, split into three categories.

The first, 'international' brands, have a universal appeal to consumers in many countries, enabling common brand positioning, ad campaigns and other marketing synergies. Examples include Lipton tea, Magnum Ice cream, Dove soap, Omo fabric detergent and Calvin Klein fragrances.

The second category is known as 'international brand positionings'. These are brands that seek a consistent global consumer positioning, but which have name variants according to the market. For example, Flora in the UK is Becel in Germany and the Netherlands, while PG Tips in the UK is Bushells in Australia, Home Cup in Africa and Ting Hua in China.

The final category is 'local jewels' - brands with an exceptionally strong and often unique position in a country or region, whose termination might cause a national outcry. Examples include Persil in the UK and Wishbone salad dressing in the US.

Having announced this strategy in February 2000, Unilever then further increased its challenge by embarking on a pounds 17.5bn acquisition drive, a strategy of targeted disposals (see box) and an internal re-organisation of its business, which included a rethink of its marketing structure and a new focus on marketing investment.

Little wonder that '2000 has been an extraordinary year for Unilever' were FitzGerald's opening comments at the results meeting. 'After the first year of the path to growth programme, we are well on plan,' he said.

'Momentum is building, as is our confidence that we will achieve this challenging strategy.'

Although Unilever beat its own target of 8% to 10% growth in year one, the City continues to hedge its bets. Shares dipped 5p on the day of the results and analysts report a certain scepticism that the company can achieve its promise of a 5% to 6% increase in annual sales by 2004 with operating margins above 16%. 'It is a good start,' says David Lang, analyst at Investec Henderson Crosthwaite. 'But it is very early days yet.'



Internal realignment

The first year of the strategy has also seen a change in Unilever's marketing structure. Under the company's old system, marketing was managed by both regional and category managers. Their remit was often not solely marketing, but encompassed areas such as innovation and development.

This is widely believed to have made for a fragmented structure and a complicated and conflict-ridden marketing hierarchy.

At the end of last year, a new internal structure was introduced, based on the creation of two divisions, Foods and HPC (home and personal care).

The creation of the categories coincided with the merger of Unilever's food brands and its newly acquired Bestfoods brands.

The structure included the creation of two presidents of marketing, one for HPC, the other overseeing Foods. The HPC position is held by former chairman of Unilever's personal care category group for Latin America, Simon Clift, while responsibility for foods has been handed to former Bestfoods marketer Anthony Simon.

The company is also in the process of bedding down a number of global brand directors who will oversee marketing internationally for its power brands. Details remain sketchy as to how many posts of this nature there will be, but the move has been broadly welcomed by observers.

'Having brand management organised on a global basis within two divisions should straighten out the kinks between brand management and execution,' says Lang. 'The lines of command are straighter, and authority more visible.'

It is a view echoed by observers within the marketing arena. 'There are far fewer hiding places,' says one. 'Everyone is expected to deliver and that has added to the sense of urgency and purpose.'

But the path to a streamlined portfolio remains far from obstacle-free.

'There is a sense that the company is finding it harder to organise itself to achieve its goals than it did to set the strategy,' says another observer.

'For example, an announcement on the dedicated brand directors was expected in November, but it has not yet been made. There is a lot of internal tension, with people flexing muscles to acquire territory.'

Unilever's acquisition programme of 2000 has added the additional task of merging some very different corporate structures and attitudes into its business. This has been particularly apparent within Foods, following the merger with Bestfoods. 'The cultural differences have been more pronounced than we had anticipated,' admits Patrick Cescau, director of Foods. 'Unilever has an intellectual approach, while Bestfoods is more streetwise and action-oriented.'

Yet Cescau is certain this is the way forward. 'In the past we analysed for far too long before moving,' he says. 'We are challenging our ways of thinking.'



Slimming down

Old Unilever was often described as a supertanker - unstoppable once it got going, but slow to react. Yet in the first year of its new strategy, the company has shed much of its unprofitable cargo, ridding itself of about 630 brands, leaving 970 brands in its portfolio.

This has been achieved by three means: disposals, which have seen Unilever wave goodbye to brands including Batchelors, Elizabeth Arden and Oxo; delisting, including Blueband and Krona margarine (a further 250 to 300 are scheduled for delisting by the end of 2002); and merging second- or third-tier brands into leading brands, which has been achieved most successfully with the migration of Radion into Surf.

Radion, with a market share of only 2% in 1999, was merged into Surf via the introduction of Surf with Sunfresh - Sun Fresh having been identified as the key element of Radion that consumers identified with.

The packaging was adapted to incorporate the Sun Fresh element and the exercise was communicated via both advertising and below-the-line communication to ensure trial among former Radion customers. Surf with Sun Fresh now boasts a market share higher than old Surf and Radion combined.

A further challenge is to manage the attrition of delisted brands in line with the scaling down of costs. FitzGerald admits that attrition has gone 'a little faster than expected' as marketing support has been withdrawn. 'We are happy for it to go faster,' he said, 'if we can manage the process and protect earnings per share. To do this you need to take costs out at the same rate.'

For this reason, those brands scheduled for delisting remain closely under wraps. Yet insiders say that marketing spend is already being dramatically scaled down on some brands and will be visible through published data in the fullness of time.



Spend pledge

At the launch of 'path to growth', Unilever promised an extra pounds 1bn in marketing support for its power brands over five years. In 2000, it spent pounds 4.39bn on advertising and promotions, up 0.6% on the previous year.

The decision to unite its marketing muscle behind a sleeker portfolio of brands has already generated considerable innovation. Three months ago, Unilever continued its global roll-out of cholesterol-reducing spread brand Pro-Activ in Europe.

The brand is being introduced under three parent brands across the globe, Flora, Becel and Freedor. After three months, sales in Europe are running at an annual rate of pounds 62.7m.

The launch of Comfort Refresh has also been indicative of a new attitude toward advertising and media, which has seen a move away from its traditional reliance on TV advertising.

Research showed the audience for this product was professional, had an active social life and was versed in new media, so the media mix was adapted to include elements that would have raised eyebrows within old Unilever: women's interest portals, interactive TV and sampling in bars, restaurants and gyms.

This new outlook toward both innovation and marketing strategy is also reflected in the launch of non-traditional initiatives, such as its 'my home' initiative, which was rolled out across London after a trial in West London; Lynx Barbershop, which recently opened a second outlet in Kingston; and Cha Teashops, a new model of which will soon open in Bristol.

Unilever is undoubtedly a more dynamic company than it was a year ago.

'Part of 'path to growth' has been the introduction of an enterprise culture,' says Keith Weed, chairman of Unilever-owned Lever Faberge. 'We are more strategy-led, there is greater brand alignment, we move quicker and we can deliver greater marketing impact behind our brands.'

But the company is not yet out of the woods. It has set itself some big marketing goals. Now the challenge is to make them come true.



2000: THE INS AND OUTS

Acquisitions

Unilever made 20 acquisitions worldwide over the past year. The most high profile of these was the dollars 20.3bn (pounds 14bn) takeover of Bestfoods, whose brand portfolio includes Hellmann's mayonnaise and Knorr soups.

It also acquired diet drink company Slimfast for dollars 2.3bn (pounds 1.6bn) in April and the Vermont-based Ben & Jerry's ice cream company in October for dollars 326m (pounds 204m).

Other acquisitions, likely to be less familiar to UK observers, included Groupo Cressida and Corporation Jaboneria NA in Central and South America, respectively.

Both company portfolios include foods, home and personal care brands.

Another acquisition was French culinary products company Amora Maille.



Disposals

Unilever disposed of 27 businesses in 2000. In July, it announced the sale of the European Bakery Business, which was sold to Dutch food product and ingredients company CSM.

In October it revealed plans to sell off Elizabeth Arden to FFI Fragrances for about dollars 225m (pounds 155m). This included all Elizabeth Arden fragrances, colour and skincare brands and the White Shoulders brand. But Unilever retained its prestige fragrances brands, such as Chloe and Valentino, which have been incorporated into Unilever Cosmetics International.

In the same month it also revealed that it would divest Bestfoods Baking Company in the US, acquired as part of its merger with Bestfoods. This business included brands such as Entenmann's, Thomas' English muffins and bagels and various bread brands.

In January, Unilever announced plans to sell its dry soup and sauces business in Europe to Campbell Soup Company. This included several businesses and some big brand names, most notably, from a UK perspective, Batchelors and Oxo.

ADSPEND OVER THE PAST FIVE YEARS (POUNDS)

                            1996            1997           1998

Total                131,530,033     139,955,197    149,650,027

Bestfoods UK          13,158,317      15,315,282     22,975,274

Birds Eye Wall''s      36,393,175      28,712,626     31,872,059

Lever Brothers        39,312,797      41,653,897     46,689,546

Van den Bergh         42,665,744      54,273,392     48,113,148

                            1999            2000

Total                147,386,529     129,561,639

Bestfoods UK          21,059,663      11,364,245

Birds Eye Wall''s      26,695,654      25,196,411

Lever Brothers        47,362,936      41,293,647

Van den Bergh         52,268,276      51,707,336

Source: ACNielsen MMS





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