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Unilevers Path To Growth Strategy
Unilevers Path To Growth Strategy
Agenda
Company Overview Environmental Analysis Financial Analysis Strategic Issue Recommendations Implementation Q&A
Company Overview
Created in 1930 as result of a merger Key player in the food and household products industry Maintains dual headquarter/dual chairperson approach Launched Path to Growth strategy (2000) to revive the company Historically grew through acquisitions
Competitor Comparison
Top Segment Top Brand CEO Stock per share Growth Revenues Revenue Growth International Business Segments Employees
Consumer care Tide A.G. Lafley $53.76 9.25% 28.2 BL 19% 42 5 110000
Food Mac & Cheese R. Deromedi $30.70 8.2% $31,010 M 4.3%% 150+ 5 10600
S.W.O.T. Analysis
Strengths
Recognized as a global company Strong brand portfolio Strong relationship with retailers Economies of scale
Weaknesses
Dual leadership Not connecting with customers Inefficient management of brands Reduced spending for R & D Inability to maximize acquisitions Threats Decrease in revenues Strong Competition Increasing store brands Tougher Business Climate Exchange rates
Opportunities
Changing consumer preferences Increasing need for healthy products
SlimFast
Rationale
Build strong portfolio Strategically attractive category
Bestfoods
Attractive Drivers
Strong customer reach 20% annual growth rate Strong sales and distribution network Opportunity for product Would make Unilever worlds largest ice cream products maker Premium prices Strong brand equity 10th largest U.S. based food products companies History of growth in revenues and earnings Strong global position
Unilever contributions
$2.3 billion cash International presence $20.3 billion euro cash; assumption of net debt Operating efficiency Similar portfolios and geographic coverage
Financial Analysis
Revenues
54,000 52,000 50,000 48,000 46,000 44,000 42,000 40,000 2000 2001 2002 2003 Revenue
3500 3000 2500 2000 1500 1000 500 0 2000 2001 2002 2003 Net Income
Net Income
Employees
280000 270000 260000 250000 240000 230000 220000 210000 2000 2001 2002 2003 Employees
57%
Years of slow performance Lack of sound corporate strategy Numerous low-volume brands Small global presence compared to competition Mediocre performance in emerging markets
5 year growth plan Reduce portfolio to 400 core brands Focus R & D and advertising on leading brands Concentrate on product innovation to fuel internal growth Grow through acquisitions
Strategic Targets
Achieve double-digit EPS growth Secure a better competitive position in global food and household Build brand value to gain pricing power
Top-line sales growth of 5-6% annually Increase operating profit margins 11% to over 16% Plan to be accomplished by year end 2004
Is it working?
Yes
Successfully trimmed unsuccessful brands Leading brands increased sales from 75% to 93% 12 brands with sales of 1B+ Consistent growth in Home & Personal Care Improved overall quality and growth profile of Food portfolio
Global procurement programs have delivered 2.4B, excess of 1.6B target Improved capital efficiency Successful integration of Bestfoods acquisition Operating assets have improved by 9%, exceeding 6% target
Is it working?
No. Unilever was getting there, but getting there too
late
Reported a net loss of $318M In 2004, underlying sales grew by only .4%, leading brands by .9% Issued 1st ever profit warning ahead of third quarter results, 3% decline Lagging behind competitors in terms of marketing and innovation
Failure to increase advertising and marketing efforts Still lack focus and effective strategy execution The company remained too local and fragmented Unilever plans to discontinue the Path to Growth Strategy
So whats next?
Strategic Issue
What adjustments, both internally and externally, should Unilever make to rebuild a strong and focused competitive strategy?
Recommendations
1. Reorganize and streamline Unilevers organizational structure. 2. Implement Unilever Believer product and brand extensions.
Recommendation 1
Recommendation 1
Strategy Justification
Unilever maintained two business entities, dual chairperson approach Unilever Group owns Unilever Plc and Unilever NV List stock separately and share board of directors Management typically wear two/three hats Board and business responsibilities conflicted Company remained two local and fragmented Recognize the need to streamline leadership and management structure
Unilever Plc
Unilever NV
One Unilever
An initiative to create an overall umbrella brand across all Unilevers brands that will eventually consolidate various businesses under one name
One Unilever
One Unilever
Corporate Functions
Margarines, spreads, oils Frozen Foods Icecreams Tea-based beverages Culinary Health and Wellness Fragrances Deodorants/toiletry Oral Care Soaps, lotions, skin care Laundry Househould care Cleaning Products
Customer Business Development Finance Human Resources IT Market Research Government Relations Product Supply Public Affairs
One Unilever
Corporate Functions
A simpler management structure will increase accountability and speed the decision making process.
Margarines, spreads, oils Frozen Foods Icecreams Tea-based beverages Culinary Health and Wellness Fragrances Deodorants/toiletry Oral Care Soaps, lotions, skin care Laundry Househould care Cleaning Products
Customer Business Development Finance Human Resources IT Market Research Government Relations Product Supply Public Affairs
Recommendation 1 Deliverables
Provides a greater clarity of leadership, responsibility, and accountability Allows Unilever to focus on the needs of their customers and consumers thus reigniting growth and increasing sales potential Provides the ability to leverage scale of operations Create a strategic platform for brand management
Recommendation 2
Unilever Believer
Program that focuses on brand initiatives to the consumer Lets the consumer know more about the product and its uses Believe in Unilever Objective: Bring top of the mind awareness Strategy: Use advertising that connects with consumer needs
Recommendation 2
Strategy Justification
Consumers demand high quality products that both are convenient and delicious Consumers look for new ways to use products More females are working full time jobs Large population of single-parent households Increase consumer focus on health and nutrition
Products of Focus
Lipton Extension
Focus on Energy Drinks
Lipton Extension
roduct: Lipton Lift Target Market: Young adults 18-32 Uses: stay up all night and/or start a night out Main Ingredients: Caffeine, Vitamin B, Guarana
Advertisements: Highlight healthier ingredients of th product while showcasing its ability to give energy a evitalize body
Featured advertisements on how consumers use Ragu EXAMPLE of new product usage A mom showing how she uses Ragu as a base for her chili
Call to Action: How Do U Ragu contest & website with new uses The created new uses will get our consumer involved in being a Unilever Believer
Focus on Consumers on the Go Ragu Lunch Pack -Ragu sauce -Cooked spaghetti -Garlic Bread
How do I Ragu On the Go
Recommendation 2 Deliverables
Delivers innovative products that capitalizes on changing consumer preferences Allows Unilever to focus on the needs of their customers and consumers thus reigniting growth and increasing sales potential Provides a strong competitive platform against major competitors and private label brands
Q&A