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Unilever’s Path to Growth

Strategy:
Is It Working?

Bianca Cole ~ Reginald Green ~ Kameela


McClinton ~ Stephanie Richardson ~ Derek
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 CG/Foods Consumer care Food Food


Top Brand Dove Tide Mac & Cheese Kit Kat
CEO A. Burgmans A.G. Lafley R. Deromedi P. Letmathe
Stock per share $66.03 $53.76 $30.70 66.90
Growth 15.58% 9.25% 8.2% 11.23%
Revenues 42,942M 28.2 BL $31,010 M $69 B
Revenue Growth -11.93% 19% 4.3%% -1.93%
International 100+ 42 150+ 86
Business Segments 3 5 5 6
Employees 234000 110000 10600 253000
S.W.O.T. Analysis
Strengths Weaknesses
 Recognized as a global  Dual leadership
company  Not connecting with

 Strong brand portfolio customers


 Strong relationship with  Inefficient management of

retailers brands
 Economies of scale  Reduced spending for R & D

 Inability to maximize

acquisitions
Opportunities Threats
 Decrease in revenues
 Changing consumer  Strong Competition

preferences  Increasing store brands

 Increasing need for  Tougher Business Climate

healthy  Exchange rates

products
SlimFast Ben & Jerry’s Bestfoods
Rationale

•Build strong portfolio


•Strategically attractive
category

Attractive Drivers

•Strong customer reach •Would make Unilever world’s •10th largest U.S. based
•20% annual growth rate largest ice cream products food products companies
•Strong sales and maker •History of growth in
distribution network •Premium prices revenues and earnings
•Opportunity for product •Strong brand equity •Strong global position

Unilever contributions

•$20.3 billion euro cash;


•$2.3 billion cash assumption of net debt
•$326 million
•International presence •Operating efficiency
•Competencies in the industry
•Similar portfolios and
geographic coverage
Financial Analysis

Revenues Net Income

54,000 3500

52,000 3000

50,000 2500

48,000 2000

46,000 Revenue Net Income


1500

44,000 1000
42,000 500
40,000 0
2000 2001 2002 2003 2000 2001 2002 2003
Financial Analysis (cont.)

Net Profit Margin Employees

0
280000

0 270000

0 260000
0 250000
Net Profit
0 Margin 240000 Employees
0 230000
0
220000
0
2000 2001 2002 2003 210000
2000 2001 2002 2003
Revenues: Product Segmentation

43%

57%

Foods Division
Home and Personal Care
Why Path to Growth Strategy

 Years of slow performance


 Lack of sound corporate
strategy
 Numerous low-volume brands
 Small global presence compared to
competition
 Mediocre performance in
emerging markets
Elements of Path to Growth

 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
Source: Crafting and Executing Strategy
Objectives of Path to Growth

Expectations Strategic Targets


 Achieve double-digit  Top-line sales
EPS growth growth of 5-6%
 Secure a better annually
competitive position  Increase operating
in global food and profit margins 11%
household to over 16%
 Build brand value to  Plan to be
gain pricing power accomplished by
year end 2004
Is it working?
Yes…
 Successfully trimmed  Global procurement
unsuccessful brands programs have delivered
2.4B, excess of 1.6B
 Leading brands target
increased sales from  Improved capital
75% to 93% efficiency
 12 brands with sales of 1B+  Successful integration of
 Consistent growth in Home Bestfoods acquisition
& Personal Care  Operating assets have
 Improved overall quality improved by 9%,
and growth profile of Food exceeding 6% target
portfolio
Is it working?
No…. “Unilever was getting there, but getting there too
late”

 Reported a net loss of  Failure to increase


$318M advertising and
 In 2004, underlying sales marketing efforts
grew by only .4%, leading  Still lack focus and
brands by .9% effective strategy
 Issued 1st ever profit execution
warning ahead of third  The company remained
quarter results, 3% too local and fragmented
decline  Unilever plans to
 Lagging behind discontinue the “Path to
competitors in terms of Growth” Strategy
marketing and innovation

So what’s 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


Unilever’s 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 Reduced effectiveness and
share board of directors
slowed the decision making
 Management typically wear
two/three hats process.
 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

One Unilever
overall umbrella brand across
all Unilever’s brands that will
eventually consolidate various
businesses under one name
One Unilever

Cross Functional Management Team

Market
Global
Global Business Units Development Corporate Functions
Business Services
Organization

•Margarines, spreads, oils


•Frozen Foods
•Icecreams •Customer Business
•Tea-based beverages Development
•Culinary •Ireland •Global Enabling Team •Finance
•Health and Wellness •Korea •Regional Leadership •Human Resources
•Fragrances •Neverlands Team •IT
•Deodorants/toiletry •Italia •Global Process Owners •Market Research
•Oral Care •US •Government Relations
•Soaps, lotions, skin care •Product Supply
•Laundry •Public Affairs
•Househould care
•Cleaning Products
One Unilever

Cross Functional Management Team

Market
Global
Global Business Units Development Corporate Functions
Business Services
Organization

•Margarines, spreads, oils


•Frozen Foods
•Icecreams •Customer Business
•Tea-based beverages Development
•Culinary •Ireland KEY TO SUCCESS
•Global Enabling Team •Finance
•Health and Wellness •Korea •Regional Leadership •Human Resources
A simpler management structure will increase accountability
•Fragrances •Neverlands Team •IT
•Deodorants/toiletry •Italia •Global Process Owners •Market Research
•Oral Care
and speed the decision making process.
•Soaps, lotions, skin care
•US •Government Relations
•Product Supply
•Laundry •Public Affairs
•Househould care
•Cleaning Products
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
Objective: intop
Bring Unilever
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

Energy drinks jumped 56% in sales last year

Market has exceed $100 million

Main Competitor: Red Bull

Positioning Statement: A Healthier Alternative t


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
How Do You RAGU?
Marketing & Advertising
 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
How Do You RAGU?
Product Line Extension

 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