Unilever was arguably the world's first packaged goods manufacturer, and is still one of the global leaders, with operations in every corner of the globe and an especially strong profile in emerging markets. It was one of the original pioneers in household detergents - products today include Omo and Persil - and it remains the world #1 in personal wash and deodorants, with brands including Dove, Rexona and Axe/Lynx. Following a series of high-profile acquisitions, including US-based Bestfoods, it is also a major force in foods, and a global leader in sectors such as culinary foods, ice cream, arine and tea. Brands include Knorr, Lipton and Magnum. Yet Unilever also struggled for several years to adapt to the faster-moving business environment of the 21st century. In the late 1990s, the group initiated a strategy to prune its vast portfolio, disposing of regional products and rebadging others in order to concentrate on a smaller roster of global power brands. That mammoth task finally began to deliver results from 2005. So much so, perhaps, that in 2017, Unilever was shaken by an unexpected bid approach from fast-expanding predator Kraft Heinz. The approach was quickly defeated but has prompted an internal review of operations to deter further such attacks. The group operates through two main divisions, Unilever Home & Personal Care and Unilever Foods
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Recent stories from Adbrands Weekly Update:
Adbrands Weekly Update 27th Apr 2017: Unilever made a comparatively rare addition to its food portfolio - it has mostly been shrinking that division in recent years - with the acquisition of Sir Kensington's, a US company making upscale ketchup, mustard and mayonnaise, including vegan mayo. (That name! Ugh! It will need to be changed if they want to market the range in the UK). No price was disclosed. The deal accompanied slightly better than expected 1Q results. Underlying sales growth was 3%, or 6% including the benefits of currencies and acquisitions. Of the group's four divisions, refreshment - ice cream and tea - did best with a lift of 5%; other foods excluding spreads managed less than 2%, with personal care and home care at 3% and 4% respectively. As usual, all of the growth came from emerging markets not North America and Europe, both of which suffered underlying sales declines.
Adbrands Weekly Update 13th Apr 2017: Unilever and P&G, two of the world's biggest advertisers, have vowed to cut back on marketing expenditure, and especially on the number of companies they work with. In a conference call with investors, Unilever CFO Graeme Pitkethly said the company discovered that it currently works with around 3,000 different agencies around the world. It aims to cut that number by half, and produce 30% fewer ads than at present. That announcement prompted a 4% slump in the share price of WPP, Unilever's biggest marketing services supplier. P&G is already executing a similar strategy. Brand building chief Marc Pritchard told the 4A's Transformation conference "We fed the complexity beast by hiring thousands of agencies globally", and has already cut this roster by half. Now he too plans to streamline the number of ad messages being communicated. “We bombard consumers with thousands of ads a day. We're awfully busy, but all of this activity is not breaking through the clutter. It's just creating more noise.... We need to stop chasing our tails and have the courage to do less. Doing fewer and better ideas is indeed an act of bravery."
Adbrands Weekly Update 23rd Feb 2017: The Brazilian investors behind 3G Capital blotted their hitherto spotless copybook with a botched attempt to add Unilever to their portfolio. Jorge Paulo Lemann and his partners have in less than ten years seized control of a string of iconic North American businesses including Anheuser-Busch, Kraft, Heinz, Burger King and Tim Hortons. Buoyed up by their equally successful recent assault on Anglo-South African SABMiller, they attempted another move into Europe by targeting Anglo-Dutch icon Unilever. On Friday, following a breaking news item in the Financial Times, 3G-controlled Kraft Heinz confirmed that it had made an offer to acquire Unilever - roughly twice its size by revenues - for around $50 per share in cash and stock. That offer had been rejected, Kraft Heinz said in its statement, but "we look forward to working to reach agreement on the terms of a transaction". Don't bet on it, was the angry public response from the target company, which said the offer was "not the basis for any further discussions" and had "no merit, either financial or strategic". It quickly became clear that Kraft Heinz would face considerable opposition not only from Unilever's board but also from the British and Dutch governments.
As a result, in an extraordinary volte face, Kraft Heinz pulled the plug on its strategy on Sunday evening, not much more than 48 hours after the bid was publicly confirmed. All a bit of a mess. The biggest surprise here is that Kraft Heinz and 3G seem to have been so ill-prepared for opposition to their plan. Yet Unilever CEO Paul Polman had already firmly rejected an initial private approach from Kraft Heinz chairman Alexandre Behring, and with a value of $143bn, this would have been the second largest corporate takeover in history after Vodafone-Mannesman; a mammoth undertaking. Opposition was inevitable, yet 3G not only ignored all the early warning signs but had no plan in place to counter resistance. For its part, in response to this short-lived but menacing assault, Unilever has quickly launched an operational review to find ways of boosting profit margins, and thereby ward off the attentions of any further predators.
Adbrands Weekly Update 26th Jan 2017: Unilever continued on a path of slow but steady growth, despite the ever-present headwinds of currencies and what it described as "severe economic disruptions, particularly in India and Brazil". The company claimed underlying sales growth of 3.7% though reported revenues for the year slipped 1% to E52.7bn. At constant rates, they would have risen by over 4%. Best performers, as usual, were the home care and personal care businesses, where underlying sales were up between 4% and 5%. Refreshment - tea and ice cream - came in slightly under 4% while foods were just over 2%. Also as usual, all the growth came from emerging markets, while developed markets were marginally negative. Net profit rose 5.5% to E5.5bn
Adbrands Weekly Update 13th Oct 2016: Unilever reported 3Q results demonstrating a slight decline in global sales volumes, but underlying sales growth of 3%, generated entirely by higher prices. Turnover of E13.4bn was down 2% at current rates, but almost up 5% excluding currency fluctuations. This pricing-led strategy threatens to have a damaging long-term effect in highly competitive markets such as the UK. The results coincided with reports of a row between Unilever and the country's biggest supermarket Tesco. Unilever had told retailers it has to raise prices in the UK to compensate for the collapse in the value of sterling since the Brexit referendum. Tesco apparently refused to accept hikes of as much as 10% on certain products, with the result that deliveries of Unilever products were suspended. They were pulled from sale through its online store, and stocks were said to be running low in all bricks and mortar outlets. The resulting media attention appears to have restored calm. Following negotiations, it was reported late on Thursday that an agreement had been reached. Unilever issued its own press release "to confirm that the supply situation with Tesco in the UK and Ireland has now been successfully resolved." It's not known which side backed down.
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Free for all users | see full profile for current activities: This giant business was formed by the effective merger in 1930 of Dutch company arine Unie and Britain's Lever Brothers. William Hesketh Lever founded Lever Brothers in 1885 after working in his father's wholesale grocery business. (His brother James, an invalid for many years, received credit in the corporate name but in fact only ever played a minor role in the business). Soon afterwards Lever introduced the world's first packaged, branded laundry soap, which he called Sunlight, backing it with a large-scale advertising campaign. Sunlight was enormously successful and Lever quickly established factories in Europe, North America, Australia and the Far East. To get hold of the vegetable oils required to make soap, the company also established a string of plantations in British colonies around the world. In recognition of his extraordinary business achievements, Lever was knighted by Queen Victoria, and took on the title of Lord Leverhulme. (That name was another personal invention: Hulme was his wife's maiden name).
During the First World War, Leverhulme also began to diversify into foods, making arine, and later acquiring fisheries, canned foods, meat and ice cream businesses. Towards the end of his career, however, his business strategy had become increasingly erratic, leading the company into what proved to be considerably less profitable areas. The most dramatic of these was the establishment of the United Africa Company, a general trading merchant based in Nigeria, which became a huge drain on the group's resources. After Leverhulme's death in 1925, the Lever board led by Francis D'Arcy Cooper attempted to restructure to counter the effects of these diversifications, but with only limited success.
The move into foods had brought Lever Brothers into competition with arine Unie, a European food manufacturer founded by two Dutch family-owned companies, Jurgens and Van den Bergh, around their respective brands Stork and Blue Band. Each family had run their own butter and arine companies since the mid-19th century, before combining forces in 1927 to exploit the UK and other European markets. By the late 1920s, there was a compelling argument for Lever and arine Unie to find ways of working together. Lever offered sales and manufacturing operations all over the globe, but lacked financial stability. arine Unie had extensive interests throughout Continental Europe, and a very strong balance sheet. After almost two years of negotiations, the two companies joined forces in 1930, combining most of their international businesses.
By the 1940s, Unilever had established itself as a major force in the United States as well. The devastation of the US farming economy caused by the Great Depression led to a shortage of cooking fats, and Unilever's arine and edible oils business prospered during the 1930s. The group also bolstered other parts of its growing operations there, acquiring the Thomas J Lipton tea business in 1937 and Pepsodent toothpaste in 1944. But in 1946, the laundry division was suddenly faced with a new and cheaper competitor, as a result of the introduction of synthetic detergent Tide by Procter & Gamble. With the benefit of a huge advertising campaign Tide quickly established itself as America's best-selling washing powder, overturning Unilever's lead.
Although the soap and arine businesses remained the core of Unilever's business throughout the company's growth, they became less important over the years. In 1930 they had accounted for 90% of Unilever's profits. By 1980 the figure was down to 40%, and the contribution has continued to dwindle ever since. Meanwhile frozen foods, ice cream, packaged soup, tea and personal products all grew in significance through a series of acquisitions: Birds Eye Foods in the UK in 1957, American ice cream maker Good Humor in 1961, Lawry's Foods in 1979, The Brooke Bond Group in 1984, Ragu in 1986, Cheseborough-Pond's in 1987, and the Faberge/Elizabeth Arden and Calvin Klein fragrance businesses in 1989. Well over 100 further purchases were made between 1992 and 1996, many in smaller local markets. Over half were in foods, and most of the rest were in detergents and personal products. Among the most prominent were the purchase of Helene Curtis (hair care) and Diversey (industrial cleaning), both in 1996. At around the same time, the group extracted itself from several of its original core businesses, selling off its specialty chemicals division in 1997 to ICI for $8bn.
This string of acquisitions resulted in an enormously disparate group of regional businesses. Unilever had a large number of strong local brands, but surprisingly few products with truly international appeal. As a result, in late 1999, the group announced a radical restructuring of the portfolio, the so-called Path To Growth strategy masterminded by CEO Niall Fitzgerald. This promised to reduce the portfolio from 1,600 brands in 2000 to just 400 by 2005. But while it disposed of one set of brands, Unilever also set about adding another collection of new products to the portfolio to strengthen specific strategic sectors. At the end of 1999 Unilever spent £460m to acquire France's leading independent sauces and salad dressings company Amora Maille. This was followed in 2000 by several big US deals, including slimming snacks and drinks company SlimFast for $2.3bn and ice-cream company Ben & Jerry's for $326m. But the biggest purchase of all came when the group offered more than $18bn in cash to acquire food giant Bestfoods. The offer was initially declined, but after several months of negotiation, the two sides agreed on a new price of $20.3bn, making this one of the biggest ever takeovers in the global food industry. Meanwhile the last remaining non-core businesses were divested. Unipath, which marketed the female contraceptive Persona and home ovulation kit Clearplan, was sold in 2001; industrial cleaning company DiverseyLever was sold to SC Johnson in 2002. (Unilever retained a 33% shareholding until 2009); European Bakery Supplies Business was sold in 2000 to Dutch food group CSM; and specialty oils and fats business Loders Croklaan, was sold in 2002 to Malaysia's IOI Corporation.
By the end of 2002, the strategy appeared to have got off to a good start, and there were record profits of E2.8bn in 2003. But a year later there were signs that this mammoth restructuring had also cost the group much of its innovative sparkle. Although several core products within the portfolio continued to blossom (notably Dove, Axe/Lynx and perhaps Knorr), others gradually slipped from prominence. Performance was further hampered by a series of factors beyond the company's control, such as poor weather which affected sales of its ice creams worldwide, and the low-carb diet craze, which severely dented sales of key acquisition Slim-Fast. Unilever promised towards the end of the year to fix these problems with additional marketing and improved new product development. The group's co-chairman Niall Fitzgerald, long established as the public face of Unilever, stepped down ahead of schedule at the same time, and was succeeded by Patrick Cescau . A further overhaul of the senior management team was designed to streamline decision-making, and reduce costs. In particular, the group abandoned its archaic management committee structure headed by two equal co-chairmen, in favour of a more efficient hierarchy. Under another strategy, One Unilever, launched in 2004, the group steadily simplified local operations, combining multiple operating businesses to form single regional management teams. See full profile for current activities
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