Unilever Plc (Unilever N.V.)

Unilever Plc (Unilever N.V.)

P.O. Box 68
Unilever House
Blackfriars
London EC4P 4BQ
United Kingdom
(071) 822-5252
Fax: (071) 822-5898

P.O. Box 760
3000 DK Rotterdam
Netherlands
(10) 464-5911
Fax: (10) 217-4798

Public Company
Incorporated: 1929 as Unilever Ltd. and Unilever NV
Employees: 292,000
Sales: £27.56 billion/Dfl76.43 billion (US$40 billion)
Stock Exchanges: London Amsterdam New York Paris Frankfurt Brussels Zürich Luxembourg Vienna
SICs: 2841 Soap & Other Detergents; 2844 Perfumes, Cosmetics & Other Toilet Preparations; 2079 Shortening, Table Oil, Margarine & Other Edible Fats and Oils

If the adage “two heads are better than one” applies to business, then certainly Unilever is a prime example. The food and consumer products giant actually has two parent companies: Unilever PLC, based in the United Kingdom, and Unilever N.V., based in the Netherlands. The two companies, which operate virtually as a single corporation, are run by identical boards of directors, in which the chairman of each automatically becomes vice-chairman of the other. Brand-name foods, drinks, and personal products such as soap and detergent constitute the majority of Unilever’s business. Unilever brands include Imperial and Promise margarines, Lipton tea, Ragú foods, detergent products such as Wisk, Sunlight, and Dove, as well as personal products like Vaseline, Pond’s, and Elizabeth Taylor’s Passion perfume. Unilever’s other major activity is in specialty chemicals.

William Hesketh Lever, later Lord Leverhulme, was born in Bolton, England, in 1851. The founder of Lever Brothers, Lever had a personality that combined “the rationality of the business man with the restless ambitions of the explorer,” according to Unilever historian Charles Wilson.

During the depression of the 1880s, Lever, then a salesman for his father’s wholesale grocery business, recognized the advantages of not only selling, but also manufacturing, soap, a noncyclical necessity item. His father, James Lever, was initially opposed to the idea, believing that they should remain grocers, not manufacturers. He softened, however, in the face of his son’s determination. In 1885 William established a soap factory in Warrington as a branch of the family grocery business. Within a short time Lever was selling his soap throughout the United Kingdom, as well as in Continental Europe, North America, Australia, and South Africa.

William also began a tradition that to some degree still exists at Unilever—that of producing all its raw components. Lever Brothers, a vertically integrated company, grew to include milling operations used to crush seeds into vegetable oil for margarine as well as packaging and transporting businesses for all of its products, which then included Lux, Lifebuoy, Rinso, and Sunlight soaps.

In 1914, as the German Navy began to threaten the delivery of food imports—particularly Danish butter and Dutch margarine—to Britain, the British government asked William Lever to produce margarine. He eagerly accepted the opportunity, believing that the margarine business would be compatible with the soap business because the products both required oils and fats as raw materials. Lever Brothers’ successful diversification, however, now put the company in competition with Jurgens and Van den Berghs, two leading margarine companies.

Fierce competitors in the latter half of the 19th century, Van den Berghs and Jurgens had decided in 1908 to pool their interests in an effort to make the best of the poor economic situation that existed in most of the world. Competition in the margarine industry had intensified, fueled by an increasing number of smaller firms, which were exporting their products and lowering their prices to get a piece of the market. Van den Berghs eliminated the potential for problems such as double taxation—which arose from its interests in both Holland and the United Kingdom—by creating and incorporating two parent companies for itself, one in Holland and one in England. In 1920 Jurgens and Van de Berghs decided there was strength in numbers and joined with another margarine manufacturer, Schicht, in Bohemia. In 1927 the three companies, borrowing the ideal of a dual structure from Van de Berghs, formed Margarine Union Limited, a group of Dutch firms with interests in England, and Margarine Unie N.V., located in Holland.

Through the middle and late 1920s, the oil and fat trades continued to grow. Although the activities of Margarine Unie and Margarine Union were focused on edible fats (margarine), the companies had held soap interests throughout Europe for years. Similarly, although Lever Brothers had produced margarine since World War I, its focus was soap. After two years of discussion, the companies decided that an “alliance wasted less of everybody’s substance than hostility” and merged on September 2, 1929.

As it does today, the newly formed Unilever consisted of two holding companies: Unilever Limited, previously Margarine Union; and Unilever N.V., formerly Margarine Unie. The new organization included an equalization agreement to assure equal profits for shareholders of both companies, as well as identically structured boards. Unilever’s parent companies were actually holding companies supervising the operations of hundreds of manufacturing and trading firms worldwide. The end result of the merger was a company that bought and processed more than a third of the world’s commercial oils and fats and traded more products in more places than any other company in the world. Its manufacturing activities—which included detergents and toilet preparations, margarine and edible fats, food products, and oil milling and auxiliary businesses—were joined by a need for similar raw and refined materials, such as coconut, palm, cottonseed, and soybean oil, as well as whale oil and animal fats.

The Great Depression, which struck not long after the new company was formed, affected every aspect of Unilever’s multifaceted operation: its raw material companies faced price decreases of 30 to 40 percent in the first year alone; cattle cake, sold as a product of its oil mills, suffered with the decline of the agricultural industry; margarine and other edible fats were affected by damaging competition as the price of butter plummeted; and the company’s retail grocery and fish shops saw declining sales.

As prices and profits around the world threatened to collapse, Unilever had to act quickly to build up an efficient system of control. The “special committee” was established in September of 1930 to do that. Operating as a board of directors over the two boards the company already had, the special committee was designed to balance Dutch and British interests and act as an inner cabinet for the organization. It also began administering two committees established to deal with Unilever’s world affairs: a continental committee to handle businesses in Europe, and an overseas committee to supervise business elsewhere.

A new generation of management led Unilever through the 1930s: Francis D’Arcy Cooper, who had been chairman of Lever Brothers since William Lever’s death in 1925; Georg Schicht, the former chairman of Schicht Company; and Paul Rijkens, who succeeded Anton Jurgens as chairman of Jurgens in 1933. It was Cooper who seemed to lead the efforts to turn the various companies that comprised Unilever into one Anglo-Dutch team. It was also Cooper who convinced the board of the necessity for a reorganization in 1937, when the relationship between the profit-earning capacities of the Dutch and British companies found itself reversed.

Originally, about two-thirds of Unilever’s profits were earned by the Dutch group and one-third by the British group. By 1937, however, due to increasing trade conflicts in Europe, particularly in Germany, the situation had reversed. By selling the Lever company’s assets outside Great Britain, including Lever Brothers Company in the United States, to the Dutch arm of Unilever, the assets of the two groups were redistributed so that they would be nearly equal in volume and profits, which had always been the objective of the two parent companies.

Before 1945 the oils and fats industries had progressed fairly smoothly. The only major industry breakthroughs were the discovery of the hydrogenation process just before World War I, which enabled manufacturers to turn oils into hard fats, and the possibility of adding vitamins to margarine in the 1920s, which created an opportunity for new health-related product claims. But it was not until the end of World War II that the industry in general, including Unilever, began to recognize the important relationship between marketing and research.

While Unilever’s growth until the mid-1940s was a result of expanded product lines and plant capacities, its greatest achievements between 1945 and 1965 were its adaptation to new markets and technology. The decade following World War II was a period of recovery, culminating by the early 1950s in rapid economic growth in much of the Western world. Until 1955 demand continued to rise and competition was not a major issue. Afterward, however, profit margins dropped, competition in Europe and North America sharpened, and success was less assured. Unilever’s strategy was to acquire companies in new areas, particularly food and chemical manufacturers.

Before the formation of Unilever, Lever Brothers had coped with overseas expansion by purchasing two factories in the United States, one in Boston and one in Philadelphia. Following World War II, Unilever found it lacked the scientific resources needed to compete with U.S. companies in research and development. Previously, key concerns for the soap industry revolved around color, scent, lather, and how well the products adapted to changing fabrics. Following the war—to the dismay of Unilever and its U.S. subsidiary, Lever Brothers Company—development efforts in the United States succeeded in creating a nonsoap, synthetic detergent powder, which had superior cleaning powers and did not form insoluble deposits in plumbing systems in hard water. The disappointment spurred Unilever to value research as highly as marketing and sales. Lever Brothers had three detergent plants in production by 1950 but remained behind in the industry for some time.

Because the primary ingredients of the new detergents were petrochemicals, Unilever now found itself involved in chemical technology. In the synthetic detergent market, each geographic area required a different kind of product depending on the way consumers washed their clothes and the type of water available to them. The new detergents gave rise to new problems, however: the foam that detergents left in sewage systems and rivers had become a major issue by the late 1950s. As a result, by 1965, Unilever had introduced biodegradable products in the United States, the United Kingdom, and West Germany.

Throughout the postwar era, Unilever continued to invest in research and research facilities. One of its major establishments—the Port Sunlight facility in Cheshire that William Lever had founded in the 1920s—researched detergents, chemicals, and timber. In Bedfordshire, the Colworth House facility continued research efforts in food preservation, animal nutrition, and health problems associated with toothpaste, shampoo, and other personal products. By 1965 the company had 11 major research establishments throughout the world, including laboratories in Continental Europe, the United Kingdom, the United States, and India.

One example of how Unilever effectively answered market demands was its continuing research in margarine. When first developed, margarine was simply a substitute for the butter that was in short supply during wartime. But when butter once again became plentiful, the product needed to offer other advantages to the consumer. Research focused on methods to improve the quality of margarine—such as making it easier to spread, more flavorful, and more nutritious. This was the primary emphasis at Unilever’s Vlaardingen laboratory. By enhancing techniques used to refine soybean oil, the company succeeded in improving the raw materials available for margarine production while at the same time achieving vast savings, since soybean oil itself was inexpensive.

The advent of the European Economic Community, or Common Market, also created new opportunities for Unilever. The company held several conferences throughout the 1960s to discuss strategies for dealing with marketing, factory location, tariffs, cartels, and transport issues created by the Common Market. Of particular importance was the need to determine the best places for production under changing economic conditions. Since the late nineteenth century, when the companies that comprised Unilever had set up factories in other European countries to avoid tariff restrictions, Unilever’s products had been manufactured wherever it was most economical. Under the Common Market, many of the tariff restrictions that had spawned the multinational facilities were eliminated, giving the company an opportunity to consolidate operations and concentrate production in lower-cost countries.

In the 1980s Unilever undertook a massive restructuring. The company sold most of its service and ancillary businesses, such as transport, packaging, advertising, and other services that were readily available on the market, and went on a buying spree, snapping up some 80 companies between 1984 and 1988. The restructuring was designed to concentrate the company in “those businesses that we properly understand, in which we have critical mass, and where we believe we have a strong, competitive future,” Unilever PLC Chairman M. R. Angus told Management Today in 1988. Specifically, Unilever’s core businesses are detergents, foods, toiletries, and specialty chemicals.

In addition to increasing profitability in core areas, restructuring also helped Unilever execute its biggest acquisition to date: Chesebrough-Pond’s in the United States in 1986. A company with sales of nearly $3 billion, Chesebrough owned such brands as Vaseline Intensive Care, Pond’s Cold Cream, and Ragú spaghetti sauce. The acquisition allowed Unilever to fill out its international personal products business, particularly in the United States, where Unilever saw a higher profit potential.

During the 1980s Unilever’s detergent products posted a 50 percent growth in operating profit, while food products grew at a faster-than-normal rate. In the United States, plans to take on longtime rival Procter & Gamble were successful in 1984, when Unilever’s Wisk moved P&G’s Cheer out of the number two spot in the laundry detergent market. In Europe, Unilever completed its first hostile takeover attempt in 15 years, acquiring the British company Brooke Bond, the leading European tea company, for £376 million. Brooke Bond complemented Unilever’s Lipton brand, the leader in the United States. Two years later, the company launched Wisk in the United Kingdom, as well as Breeze, its first soap powder introduced in the United Kingdom since the debut of Surf more than 30 years before.

In 1989 Unilever became a major player in the world’s perfume and cosmetic industry through three more acquisitions. It obtained Shering-Plough’s perfume business in Europe; the Calvin Klein business from Minnetonka, Inc.; and, by far the largest purchase of the three, Fabergé Inc., the American producer of Chloe, Lagerfeld, and Fendi perfumes, for $1.55 billion. The upper-end cosmetics market is a high margin business, and Unilever planned to step up marketing of its new products to raise sales.

As it entered the 1990s, Unilever had virtually completed reorganizing its European business in order to better compete after the integration of the European Economic Community in 1992. In 1991 the company further refined its operations by selling the last of its packaging businesses and by making provisions for the eventual sales of the majority of its agribusinesses.

Unilever’s flexible management structure and diverse product range were integral to its survival in the rapidly changing international market. In a 1992 Harvard Business Review article, Chairman and Chief Executive Officer Floris A. Maljers explained Unilever’s management structure: “The very nature of our products required proximity to local markets; economies of scale in certain functions justify a number of head-office departments; and the need to benefit from everybody’s creativity and experience makes a sophisticated means of transferring information across our organization highly desirable. All of these factors led to our present structure: a matrix of individual managers around the world who nonetheless share a common vision and understanding of corporate strategy.”

Despite poor performances by some of its subsidiaries and recessions in Europe and North America, Unilever’s broad product range led to overall profit increases in both 1990 and 1991. In 1990 Unilever made substantial inroads into the newly opened markets created by the unification of Germany. The company began producing its Rama margarine at a former East German state plant in Chermnitz, established a task force to select sites for 23 Nordsee fish stores, and began distributing ice cream and frozen novelties to retailers in eastern Germany.

In 1991 Unilever entered a race with rival Proctor & Gamble to break into the newly opened markets of the former Soviet Union. Unilever purchased an 80 percent stake in the Polish detergent firm Pollena Bydgoscz for $20 million, changing the name to Lever Polaska, the first laundry detergent manufacturer to be privatized in Poland. The company earmarked approximately $24 million for product line expansions, including a fabric conditioner and household cleaning products.

Profits in Unilever’s personal products division were down 11 percent in 1991, due to sluggish markets in the United States and only moderate growth in European markets. Unilever’s newly purchased Elizabeth Arden and Calvin Klein, however, posted strong growth, supported by strong retailer relationships and $24 million in advertising expenditures. Such growth occurred despite an overall drop in department store cosmetic sales of nine percent from 1987 to 1992. In 1992, though, Elizabeth Arden profits began slipping, prompting the resignation of Joseph F. Ronchetti, Arden’s chief executive officer since 1978. Unilever underwent further restructuring of its personal products division, creating a prestigious subdivision geared towards introducing Calvin Klein and Elizabeth Arden into overseas markets.

Unilever’s fastest growing market in the early 1990s was in Asia. Although Unilever had been operating in Asia since its earliest days, the company was just beginning to tap into the region’s newly acquired wealth. Asian sales of personal products, detergent, and packaged foods grew more than twice as fast as sales in the United States and Europe and were expected to double by 1997.

By 1992 Unilever was composed of some 500 companies conducting business in 75 different countries. Its flexible international management structure, marketing strategies, and product range garnered the conglomerate a reputation as one of Britain’s most admired companies. “Our marketing continues to focus on the rapid transfer of successful products into new territories,” Unilever’s 1991 Annual Report declared, referring to its strategy as “the key to growing our business globally in the 1990s.” Given its broad market base and diversified product range, Unilever seems well positioned to do just that.

Principal Subsidiaries

Unifrost GmbH; Ósterreichische Unilever GmbH; Nordsee GmbH; Hartog; Iglo-Ola; Lever; Union; Uni-Dan A/S; Paasivaara Oy; Suomen Unilever Oy; Astra-Calve SA; CNF SA; Française de Soins et Parfums SA; 4P Emballages France 5A; Lever SA; Niger France SA; Compagnie des Glaces et Surgeles Alimentaires SA; Française d’Alimentation et de Boissons SA; Unilever Export France SA; Unilever France SA; Deutsche Unilever GmbH; Elida-Gibbs GmbH; 4P Folie Forchheim GmbH; 4P Nicolaus Kempten GmbH; 4P Verpackungen Ronsberg GmbH; 4P Rube Gottingen GmbH; Langnese-Iglo GmbH; Lever GmbH; Meistermarken-Werke GmbH, Spezialfabrik fur Back-und Grosskuchenbedarf; Nordsee Deutsche Hochseefischerei GmbH; Schafft Fleisch-werke GmbH; Unichema Chemie GmbH; Union Deutsche Lebensmittelwerke GmbH; Lever Hellas AEBE; Elais Oleaginous Products AE; Lever Brothers (Ireland) Ltd.; W&C McDonnell Ltd.; Paul and Vincent Ltd.; HB Ice Cream Ltd.; 3C Industriale SpA; Lever Sodel SpA; Sagit SpA; Unil-It SpA; Calvé Nederland BV; Crosfield Chemie BV; Elida Gibbs BV; Zeepfabriek de Fenix BV; Inglo-Ola BV; Lever Industrial BV; Lever BV; Loders Croklaan BV; Lucas Aardenburg BV; Naarden International; National Starch & Chemical BV; Nederlandse Unilever Bedrijven BV; Quest International Nederland BV; Exportslachterij Udema BV; Unichema Chemie BV; Unilver Export BV; UniMills BV; UVG Nederland BV; Van de Bergh en Jurgens BV; Vinamul BV; Iglo Ind#x00FA;strias de Celados, Lda.; Ind#x00FA;strias Lever Portuguesa, Lda.; Agra SA; Frigo SA; Lever España SA; Industrias Revilla SA; Pond’s Española SA; Unilever España SA; Glace-Bolaget AB; Margarinbolaget AB; Lever AB; Leverindus AB; Novia Livsmedelsindustrier AB; Elida Robert Group AB; Svenska Unilever F#x00F6;rvaltnings AB; Astra Fett-und Oelwerke AG; Chesebrough-Pond’s (Gen#x00E8;eve) SA; Elida Cosmetic AG; Lever AG; Meina Holdings AG; Sais; A. Sutter AG; Unilever (Schweiz) AG; Unilever-Is Ticaret ve Sanayi Turk Limited Sirketi; Batchelors Foods Ltd.; Birds Eye Wall’s Ltd.; BOCM Silcock Ltd.; Brook Bond Foods Ltd.; Chesebrough-Pond’s Ltd.; Jospeh Crosfield & Sons Ltd.; Elida Gibbs Ltd.; Erith Oil Works Ltd.; Lever Brothers Ltd.; Lever Industrial Ltd.; H. Leverton Ltd.; Lipton Export Ltd.; Lipton Tea Company Ltd.; Loders Croklaan Ltd.; Marine Harvest Ltd.; Mattessons Wall’s Ltd.; Oxoid Ltd.; Plant Breeding International Cambridge Ltd.; Quest International (Fragances, Flavours, Food Ingredients) UK Ltd.; UAC Ltd.; UAC International Ltd.; UML Ltd.; Unichema Chemicals Ltd.; Unilever Export Ltd.; Unilever UK Central Resources Ltd.; United Agricultural Merchants Ltd.; Van de Berghs and Jurgens Ltd.; Vinamul Ltd.; John West Foods Ltd.; ChesebroughPond’s Inc. (Canada); Lever Brothers Limited; Thomas J. Lipton Inc.; A&W Food Services of Canada Ltd.; Unilever Canada Limited; Chesebrough-Pond’s Inc.; Lawry’s Foods Inc.; Lever Brothers Company; Thomas J. Lipton, Inc.; National Starch and Chemical Corporation; Prince Matchabelli, Inc.; Ragú Foods, Inc.; Sequoia-Turner Corporation; Unilever Capital Corporation; Unilever United States, Inc.; Lever y Asociados sacif; Unilever Australia Ltd.; Lever Brothers Bangladesh Ltd.; Ind#x00FA;strias Gessy Lever Ltda.; RW King SA; Lever Chile SA; Compañia Colombiana de Grasas Cogra-Lever 5A; Plantaciones Unipalma de Los Llanos SA; Blohorn SA; CFCI SA; Uniwax SA; Hatton et Cookson SA; UAC of Ghana Ltd.; Lever Brothers Ltd. (China); Hindustan Lever Ltd.; PT Unilever Indonesia; Nippon Lever BV; Brooke Bond Kenya Ltd.; East Africa Industries Ltd.; Gailey & Roberts Ltd.; Lever Brothers (Malawi) Ltd.; Lever Brothers (Malaysia) Sdn. Bhd.; Pamol Plantations Sdn. Bhd.; Anderson Clayton & Co. SA; Pond’s de Mexico SA de CV; Unilever Becumij NV; Unilever New Zealand Ltd.; Niger-Afrique SA; Pamol (Nigeria) Ltd.; Lever Brothers Pakistan Ltd.; Philippine Refining Company, Inc.; UAC of Sierra Leone Ltd.; Lever Brothers Singapore Sdn. Bhd.; Lever Solomons Ltd.; Unilever South Africa Pty. Ltd.; Lever Brothers Ltd. (Ceylon); Formosa United Industrial Corporation Ltd.; UAC of Tanzania Ltd.; Brasseries du Logone SA; Lever Brothers Ltd. (Thailand); Lever Brothers West Indies Ltd.; Gailey & Roberts Ltd. (Uganda); Sudy Lever SA; Lever-Pond’s SA; Plantations Lever au Za#x00EE;re sari; Compagnie des Margarines, Savons et Cosmétiques au Zaire sari; Sedee sari; Lever Brothers Ltd.

Further Reading

Wilson, Charles, The History of Unilever, London, Cassell & Company, 1970; Levy, Liz, “Unilever Axes Fabergé Firm,” Marketing, November 2, 1989; Mussey, Dagmar, “Heading Back East: Unilever Knows Way Into Reunited Germany,” Ad Age, December 30, 1990; Unilever annual reports, 1990-91; Nayyar, Seema, “Unilever Makes Power Move on Arden,” Adweek’s Marketing Week, June 22, 1992; Zinn, Laura, “Beauty and the Beastliness,” Business Week, June 29, 1992; Maljers, Floris A., “Inside Unilever: The Revolving Transnational Company,” Harvard Business Review, September/October 1992; “Britain’s Most Admired Companies,” The Economist, October 17, 1992.

—updated by Maura Troester