Personal Care MarketWatch

COMPANY SPOTLIGHT: UNILEVER Unilever announces sustainable sourcing of paper packaging
Unilever has published its sustainable paper and board packaging sourcing policy as part of its strategy to double the size of the business while reducing its environmental impact. The policy outlines the company's goal to work with its suppliers to source 75% of its paper and board packaging from sustainably managed forests or from recycled material by 2015, rising to 100% by 2020. Marc Engel, chief procurement officer of Unilever, said: "As a leading consumer goods company, we buy considerable quantities of paper and board for packaging to ensure our products are protected and transported safely. As such it is important that we promote sustainable forestry practices and help combat deforestation and climate change through the responsible sourcing of these materials. "We are committed to working in partnership with all of our suppliers to progressively increase the proportion of paper and board packaging which comes from recycled materials or sustainably managed forests, in order to achieve this ambitious target."

Business description
Unilever* is one of the world's premier fast moving consumer goods (FMCG) companies, with a host of well known brands in the foods, home and personal care categories. The group sells its products through distribution centers, satellite warehouses, group-operated facilities, and public storage depots. Products are marketed under 400 brands spanning 14 categories of home, personal care and food products in over 170 countries worldwide. In addition, the group operates over 264 manufacturing sites across six continents. The group's primary operating segment comprises three geographic regions: Asia Africa; Central and Eastern Europe; The Americas and Western Europe. Although Unilever's operations are managed on a geographical basis, the group classes its products under four categories: savory, dressings and spreads; ice cream and beverages; personal care; and home care and others. These categories act as its principal product areas, as well as the secondary reporting segments of the group. The savory, dressings and spreads segment includes products such as soups, bouillons, sauces, snacks, mayonnaise, salad dressings, olive oil, margarines and spreads, and cooking products such as liquid margarines. Unilever's major brands in this segment include Knorr, Hellmann's, Becel/Flora (Healthy Heart), Rama/Blue Band (Family Goodness), Calve, Wish-Bone, Amora, Ragu and Bertolli. The ice cream and beverages segment includes ice cream, tea, weight management products and nutritionally enhanced staples sold in developing markets. Unilever's major brands in this segment include Cornetto, Magnum, Carte d'Or, Solero, Wall's, Kibon, Algida, Ola, Ben & Jerry's, Breyers, Klondike, Popsicle, Lipton, Brooke Bond, PG Tips, Slim Fast, Annapurna and AdeS/Adez.

Personal Care MarketWatch
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BFCM0398/Published 08/2010 Page 16

and oral care products. Signal and Close Up. is a public limited company registered in the Netherlands. Unilever. Cif. Axe. Unilever N. The group's major brands in this segment include Dove. soap bars and a wide range of cleaning products. Suave. Rexona (including Sure and Degree). Domestos and Sun/Sunlight. Comfort. and Unilever PLC. The group's other operation also includes Unilever Foodsolutions. Lifebuoy. Unilever N.823m December Source: Datamonitor DATAMONITOR Personal Care MarketWatch © Datamonitor.000 € 39. deodorants and anti-perspirants.Personal Care MarketWatch The personal care segment offers skin care and hair care products. Unilever N. Pond's. Sunsilk (including Seda/Sedal).com UL (New York ticker) 163.unilever. operate as a single economic entity. and Unilever PLC. Vaseline. while Unilever PLC is a public limited company registered in England and Wales. Radiant. together with their group companies. Clear. Surf. The group's home care and other operations include sales of home care products such as laundry tablets.V. * Unilever has two parent companies. Lux.V. This brief is a licensed product and is not to be photocopied BFCM0398/Published 08/2010 Page 17 . Snuggle.V. powders and liquids. The two parent companies. Skip. Table 2: Key facts Address Unilever House 100 Victoria Embankment London EC4Y 0DY GBR Brands include Lux Sunsilk Dove Pond's Vaseline Signal Telephone Fax Website Stock exchange ticker Employees Turnover Financial year end 44 20 7822 5252 44 20 7822 5951 www. a global food service business providing solutions for professional chefs and caterers. Unilever's global brands in this segment include Omo.

Personal Care MarketWatch SWOT analysis Table 3: Swot analysis Strengths Diversified revenue streams Large scale of operations Strong portfolio of brands Strong focus on R&D activities Focus on sustainability Opportunities Focus on developing and emerging economies Divesture of non-core business activities Expanding in the out-of-home eating market Weaknesses Weak liquidity position Unfunded employee post-retirement benefits Weak performance in Western Europe Threats Dampened consumer demand Intense competition Government regulations Source: Datamonitor DATAMONITOR Personal Care MarketWatch © Datamonitor. This brief is a licensed product and is not to be photocopied BFCM0398/Published 08/2010 Page 18 .

Lipton. and the number two position in hair care. and homecare and other operations generated 17. In home care. spreads. and home care and other operations. Strong portfolio of brands Unilever has an extensive portfolio of 400 strong brands spanning across 14 categories of home. the group reported 15. the top 25 brands account for over 70% of the group's total sales. the company is dependent on regional and global supply chains for the procurement of raw materials and for the manufacture. Unilever generates revenues through four product categories: savory dressings and spreads. Hellmann's. Furthermore. across product categories in several markets.5%. Heartbrand. Knorr.5m). Following different supply chain methods depending upon the situation would provide the company with economies of scale. in Foods.Personal Care MarketWatch Strengths Diversified revenue streams The group has diversified revenue streams. the group generates revenues from markets in over 170 countries. the extent of operations provides Unilever with cost advantages and operational efficiencies.0% from emerging markets such as Brazil. Lux. ice creams and beverages. it holds the global number one position in mass skin care and deodorants. Dove. both in terms of its product portfolio and geographical reach. ice cream and beverages contributed 19. A diversified product portfolio and revenue stream not only shields the group against uncertain economic climates in a specific market or demand fluctuations in certain product categories (by dispersing its business risks). China. personal care contributed 29.6% from all other countries across the world. Sunsilk and Surf. South Africa. tea-based beverages and ice cream. with a number one position in many developing and emerging markets. Flora/Becel. Omo. In personal care. 49. For example. Personal Care MarketWatch © Datamonitor. Moreover. Turkey.3% of total revenues. This brief is a licensed product and is not to be photocopied BFCM0398/Published 08/2010 Page 19 . savory. personal care and food products. Indonesia. dressings and spreads contributed 33.076.7%. it holds the global number one position in savory and dressings. personal care and food products. Rexona. In FY2009. and its products are sold under 400 brand names across 14 categories of home. In FY2009. and the remaining 26. Blue Band. typically number one or number two. personal care.5%. distribution and delivery of its products. It is a leading FMCG company which oversees 270 manufacturing facilities across six continents.5% from the Netherlands/United Kingdom.000m ($32. Moreover. but also enables it to tap opportunities available in new as well as existing markets. Unilever's global scale of operations has enabled it to achieve leadership positions. 8. These are Axe/Lynx. Mexico and Russia.9% of its revenue from the US. 13 of its brands have accounted for a global turnover in excess of €23. Furthermore. it holds the global number two position in laundry. India. Large scale of operations Unilever operates a large scale of operations.

Knorr is its biggest brand with a strong presence in over 80 countries. Unilever also started using palm oil in both food and home and personal care products. Unilever also released a new deodorant product (a combination of roll-on and spray) in the UK.000m ($4. Unilever achieved a 41% reduction in carbon dioxide emission from its factories compared to 1995. Cornetto. Signal White Now in 21 markets and Knorr Stockpots in 12 markets. accounting for around 15% of its total needs. in 2009. Unilever is also the world's largest ice cream manufacturer. which has helped the group to maintain its sector leading position on the Dow Jones Sustainability Indexes for the last 11 years. Through its Sustainable Agriculture Program. promoting biodiversity and using less energy. The group sources all its key agricultural raw materials (which form 50% of its raw materials) on a sustainable basis. For instance.000 tons of palm oil.414m). Personal Care MarketWatch © Datamonitor. A strong orientation towards R&D activities enables the group to launch new products frequently and also to introduce variants of existing products. In the same year. The group has been reducing the environmental impact of its own factories and supporting its agricultural suppliers. Strong focus on research and development activities Unilever invests strongly in the research and development (R&D) process of its products. Clear shampoo is now in 35 markets. Focus on sustainability Unilever maintains a strong focus on sustainability issues. As a result. and €927m (approximately $1. A strong portfolio of well established brands which are positioned to meet the needs of its consumers across a variety of price points. The strong focus on environmental issues will foster strong relationships with its suppliers and also improves its brand image. conserving water. the group launched Dove Minimising Deodorant in 37 markets. which is an essential component of the company's strategy. For this. The group spent around 2. the group plans to cover criteria such as reducing fertilizer and pesticide use. and owns brands such as Magnum.Personal Care MarketWatch Most of Unilever's brands are global leaders in their respective segments. The brand strength of the company is vindicated by the fact that more than two billion consumers worldwide use the company's products on a daily basis.8m) for the financial year 2009 and 2008 respectively.292.3% of its revenue on R&D in the period 2004–09. Unilever has already purchased GreenPalm certificates covering 185. It is Unilever's leading brand with annual sales of over €3.242. Unilever is also the second biggest advertiser in the world. For instance by 2008. Carte d'Or and Solero. Total R&D expenditure stood at €891m (approximately $1. and Ben & Jerry's and Breyers in the US. allows the company to compete effectively in its key categories and countries. This brief is a licensed product and is not to be photocopied BFCM0398/Published 08/2010 Page 20 .6m). the group was able to concentrate on bigger innovations and rolled them out faster around the world. In the food segment.

279m ($3. The group also paid a total of €1. Sizeable unfunded postretirement benefits will force the group to make periodic cash contributions towards bridging the gap.413m (approximately $20.9m). These constitute 70% of total current assets.4m).599m ($16.100m).684. resulting in an unfunded status of €2.679. Furthermore.367m (approximately $1.7m) as compared to the planned assets of €14.077.Personal Care MarketWatch Weaknesses Weak liquidity position The group recorded a weak liquidity position in the previous financial year. During FY2009.811m ($15. .600. by 50.2%.204m ($1. Weak performance in Western Europe Unilever has registered a weak performance in Western Europe. revenues from Western Europe declined at a rate of 6.4% from €2. Moreover. In FY2009. which is sufficient to cover only its short-term borrowings of €2. the majority of the group's current assets are tied up in inventories and current receivables.5m) for pension and post retirement benefit plans during FY2008. the group's projected pension and post-retirement benefit obligations stood at €16.841. the group incurred a total of €1. which will take comparatively longer to liquidate. At the end of December 2009.3m).176. which could result in improper working capital management and may negatively impact the group's operational efficiency and growth initiatives.6m).178.9m) in 2008 to €1. This represents 77% of the group's net profit in FY2009. This is in spite of significant income received from business disposals in 2008.701.4m) as compared to the current liabilities of €11.6m). with revenues and operating profit showing a significant decline in the previous financial year.1% to reach €12. For FY2009.515. Personal Care MarketWatch © Datamonitor.642m ($3. This brief is a licensed product and is not to be photocopied BFCM0398/Published 08/2010 Page 21 .743.1m) for pension and post-retirement benefit expenses.995m ($23. which would reduce the funds available for growth plans.250m ($1. The underlying performance of the group in Western Europe could put additional pressure on its performance in other regions.582m (approximately $3. This resulted in a current asset ratio of 93.076m ($16. the group's cash and cash equivalents stood at €2.906. The operating profit also declined significantly. Unfunded employee post-retirement benefits The group provides pension benefits and other post-retirement health and life insurance benefits to employees. This all indicates that the group's liquidity position is significantly weak.3m) in 2009.521m ($3. indicating less amount of resource to cover its short-term liabilities. the group's current assets stood at €10. leaving no funds for other working capital needs.

5 meals out of every three are eaten away from home. Furthermore. These divestments are part of Unilever's plans to dispose of non-strategic business operations.2 trillion in revenues. In the US. to expand its business operations in developing economies. in Cote d'Ivoire. operates in 65 countries worldwide. including India and China. This brief is a licensed product and is not to be photocopied BFCM0398/Published 08/2010 Page 22 . The growth would be attributable to the population's rising income and increasing demand. Developing and emerging economies are forecast to account for 90% of the world's population by 2010. Unilever Foodsolutions. the group with its Unilever Foodsolutions business is well positioned to tap the global out-of-home eating market. Divesture of non-core business activities Unilever has divested its interest in many of the non-core business areas.Personal Care MarketWatch Opportunities Focus on developing and emerging economies Unilever has been active within developing and emerging economies through its subsidiaries in Asia Pacific. in Hong Kong. and this is expected to drive demand for FMCGs. the group plans to increase its focus on the consumer business. part of the Omnicom Media Group. in December 2008. It started to work with quickservice restaurants by enabling them to provide healthier options for consumers. With the proceeds of these divestments. the Chinese FMCG market is also expected to grow at a rate of 15% a year in the next five-year period (2009-13). and Latin America. Unilever Foodsolutions is also focusing on canteens and quick-service restaurants. Furthermore. Turkey. innovation. Hellmann's. Heart. and the group expects to increase its revenue form these economies. Lipton. In December 2009. the Middle East. reaching an estimated $2. Unilever could exploit the growing market conditions. In Europe. the group decided to shift a large chunk of its innovation and R&D resources to Asia. For example. such as Hellmann's Extra Light Mayonnaise and Becel portions. Palmci and PHCI. more than half of food expenditure now happens outside the home. a food services branches of Unilever. sales and marketing. The Unilever Foodsolutions umbrella is home to global Unilever Foods brands such as Knorr. Expanding in the out-of-home eating market The global food services industry is expected to register strong growth by 2015. 2. in October 2009 the group announced the reduction of its equity interest in JohnsonDiversey (a leading provider of commercial cleaning. Slim-Fast. In 2008. The move is expected to create competitive global research centers in Asian countries. This strategic action will fulfill the group's aim of delivering consistent and competitive sales growth and improving its operating margins. maintaining focus on matters that directly affect the company's competitive positioning. sanitation and hygiene solutions) from 33% to 4%. These regions contributed to approximately 49% of Unilever's turnover in 2009. Becel and Flora. Unilever sold its edible oil business and oil palm plantations. Personal Care MarketWatch © Datamonitor. Unilever sold its media planning and buying business for Greater China to PHD. With a strong presence and leadership position across these markets. Africa. the divesture of non-core businesses will enable the group to concentrate on activities such as research. This is primarily due to the growth of the food market outside of the home. Similarly. the Indian FMCG sector is expected to grow four-fold from $25 billion sales in 2008 to $95 billion by 2018. this figure is as high as one third and. For instance. Therefore.

Declining prices. Shiseido. and manufacturers will need to offer value-added attributes in order to gain share. branded goods suppliers such as Unilever are facing pressure from big retail chains like Tesco. is putting pressure on margins. Personal Care MarketWatch © Datamonitor. Nestlé is one of the leading producers of food products in North America and Europe. France. Colgate Palmolive. These retailers. Unilever is losing the priceadvantage it once enjoyed in home and personal care products to companies such as Reckitt & Benckiser and Procter & Gamble. This brief is a licensed product and is not to be photocopied BFCM0398/Published 08/2010 Page 23 . Germany and the UK. New regulations may delay the launch of new products and result in higher product development expenditure. Furthermore. in order to sustain revenue growth and profit margins. Moreover. Lidl and Netto taking an increasing proportion of the market from the major supermarkets and stores. both key markets for Unilever. and the company's enlarged Dreyer's business poses a serious threat to Unilever's share in the ice cream market. For example. hair care sales are suffering stagnation due to heavy competition. In the foods segment. In two other key markets including India and Spain. A recent study showed that about one third of cosmetic products contain carcinogens. coupled with rising demand for discounts from trade partners. which has a direct effect on sales of the major brands. Kao Corporation and Clorox. the company faced intense competition from low-cost local competitors. in mature markets such as the US. the US Food and Drug Administration (FDA) are expected to impose stringent quality norms on cosmetic products. reduced consumer spending across the regions will affect its performance. Intense competition Unilever operates in the fiercely competitive personal care and home care markets. Increasing competition could adversely affect Unilever's market share and margins. are promoting their own-label brands. The group primarily faces competition from other major players such as Johnson & Johnson. Unilever faces stiff competition from Nestlé and Groupe Danone in its key markets. L'Oreal. The current economic climate is forcing shoppers to watch their expensed and look for cheaper options in discounted brands or own-label merchandise.Personal Care MarketWatch Threats Dampened consumer demand Unilever's business is dependent on sustained consumer demand for its products and brands. which was adversely impacted by the global downturn. This is leading to discounters like Aldi. Due to increasing public pressure. Beiersdorf. In some emerging markets. Although the organization is working hard to handle all these external pressures. Government regulations Several consumer protection groups are voicing concerns over the presence of harmful chemical ingredients in cosmetic products. the dent in the disposable income of consumers is making it increasingly difficult for branded product manufacturers like Unilever to maintain their sales volume and revenue growth.

REACH focuses on the 30. along with restrictions applicable to these chemical substances. the European Commission has published a draft regulation for the Registration. Evaluation and Authorization of Chemicals (REACH). REACH. and has set up a European Chemicals Agency. either of which could result in a decline in profitability. which came into effect recently. could impose new liabilities or increase operating expenses.Personal Care MarketWatch At the EU level.000 chemical substances introduced into the market before 1981 and manufactured or imported in quantities of more than one ton per year. Personal Care MarketWatch © Datamonitor. This brief is a licensed product and is not to be photocopied BFCM0398/Published 08/2010 Page 24 . on which hazard information has not been sufficiently well examined by the current system.

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