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Unilever
UnileverP.O. Box 68 Public Company POSTWAR ERA: ADAPTING TO NEW MARKETS AND TECHNOLOGY RESTRUCTURING AND MAJOR ACQUISITIONS POSITIONING FOR THE 21ST CENTURY STRUGGLING IN THE EARLY 21ST CENTURY A global food and consumer products giant, Unilever operates under a unique Anglo-Dutch dual structure. Twin parent companies—the U.K.-based Unilever PLC and Unilever N.V., based in the Netherlands—which are separate legal entities and have separate stock exchange listings for their respective shares. Together they comprise, with their group companies, a single economic entity known as Unilever. Headquartered in London, Unilever and its parent companies are run by a single board of directors, a nonexecutive chairman, and a group chief executive. One of the largest consumer goods firms in the world, Unilever produces numerous brand name foods, personal care items, and home care products. About 54 percent of revenues are generated in the foods sector, which includes such brands as Knorr soup mixes, bouillons, and seasonings; Amora, Calvé, Hellmann’s, and Wish-Bone dressings; Bertolli olive oil and other Italian foodstuffs; Rama, Blue Band, and Country Crock margarines; Becel and Flora heart-healthy foods; Heart-brand, Ben & Jerry’s, and Breyers ice cream; Lipton tea; and Slim-Fast weight-management products. Approximately 28 percent of sales come from the personal care area. Brands include the Lux female beauty line, Dove and Lifebuoy soap, Pond’s skin care products, Rexona deodorants, Suave and Sunsilk hair care items, Signal and Close Up oral care products, and the Axe male grooming line, as well as such miscellaneous brands as Q-Tips and Vaseline. Unilever’s third major sector is that of home care products, which is responsible for about 18 percent of turnover; brands include Omo, Skip, Wisk, Surf, and All laundry detergents, Comfort and Snuggle fabric conditioners and softeners, Sunlight dish detergents, and Cif and Domestos household cleaners. Unilever maintains more than 300 production facilities around the world and has operations in more than 100 countries. About 34 percent of revenues originate in Western Europe, 22 percent in North America, 18 percent in the Asia-Pacific region, 13 percent in Latin America, 9 percent in Africa, the Middle East, and Turkey, and 4 percent in central Europe/Russia. SOAP AND MARGARINE ORIGINSWilliam 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, initially was 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 lasted well into the 20th century 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, put the company in competition with Jurgens and Van den Bergh, two leading Dutch margarine companies. THE BIRTH OF UNILEVERJurgens and Van den Bergh both began commercial production of margarine in 1872. Fierce competitors for the remainder of the century, Van den Bergh and Jurgens 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 Bergh 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 Bergh 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 Bergh, 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. COMPANY PERSPECTIVESOur mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life. 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. KEY DATES
THE GREAT DEPRESSIONThe Great Depression, which began 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 1930 to do that. Operating as a board of directors over the two boards the company 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, because of 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. However, 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. Meantime, Unilever expanded its U.S. operations through two important acquisitions: Thomas J. Lipton Company, manufacturer of tea (1937), and the Pepsodent brand of toothpaste (1944). POSTWAR ERA: ADAPTING TO NEW MARKETS AND TECHNOLOGYAlthough 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. Among the postwar acquisitions were U.K. frozen foods maker Birds Eye (1957) and U.S. ice cream novelty maker Good Humor (1961). 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 that 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 (Procter & Gamble Company’s Tide), 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 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. However, 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, because 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 19th 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. As part of its ongoing diversification drive, Unilever in late 1968 agreed to merge with Allied Breweries Ltd., then the second largest brewer in the United Kingdom. The merger was referred to the Monopolies and Mergers Commission, and the U.K. regulatory agency approved the deal in June 1969. By that time, however, Unilever’s shares had fallen 23 percent since the beginning of the year, and the deal, which had been based on an exchange of shares, was abandoned. Unilever continued to seek opportunities to diversify in the 1970s, completing a series of modest deals in the early and middle years of the decade. In 1978, however, the company completed a major acquisition that significantly increased its presence in the U.S. market and made it a major player in specialty chemicals. Unilever spent $487 million for National Starch & Chemical Corporation in what at the time was the largest takeover of a U.S. firm by a European company. National Starch was a leading producer of adhesives, starch, and specialty organic chemicals. RESTRUCTURING AND MAJOR ACQUISITIONSIn 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 were detergents, foods, toiletries, and specialty chemicals. In addition to increasing profitability in core areas, restructuring also helped Unilever execute its biggest acquisition to date, that of 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 Ragu 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. Another significant 1986 purchase was that of Naarden International, a Dutch producer of fragrances and food flavors. Naarden was subsequently merged with Unilever’s existing operations in this sector to form Quest International, which ranked as the number two player in the worldwide flavors and fragrances industry. 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 in 1984 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 earlier. In 1989 Unilever became a major player in the world’s perfume and cosmetic industry through three more acquisitions. It obtained Schering-Plough Corporation’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 was a high-margin business, and Unilever planned to step up marketing of its new products to raise sales. POSITIONING FOR THE 21ST CENTURYAs it entered the 1990s, Unilever had virtually completed reorganizing its European business to better compete within the evolving single market in that region. 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 CEO 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 continued to battle with rival Procter & Gamble over 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 Polska, 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. Also in 1991 Michael Perry was named the U.K. co-chairman of Unilever. Profits in Unilever’s personal products division were down 11 percent in 1991 because of 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 9 percent from 1987 to 1992. In 1992, though, Elizabeth Arden profits began slipping, prompting the resignation of Joseph F. Ronchetti, Arden’s CEO since 1978. Unilever underwent further restructuring of its personal products division, creating a prestigious subdivision geared toward 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 were growing more than twice as fast as sales in the United States and Europe. By 1992 Unilever was composed of some 500 companies conducting business in 75 different countries. Unilever continued to make acquisitions in the mid-1990s, completing more than 100 purchases between 1992 and 1996, more than half of which were in foods. In 1993 Unilever gained the number one position in the U.S. ice cream market through the completion of two acquisitions. The company paid $155 million to Empire of Carolina Inc. for the Klondike and Popsicle brands, and about $215 million for the ice cream business of Philip Morris’s Kraft General Foods unit, which included the Sealtest and Breyers brands. The acquired brands were merged with the Good Humor line within Good Humor Breyers Ice Cream Company, a subsidiary based in Green Bay, Wisconsin. Also in 1993 Unilever launched a restructuring, taking a $750 million charge against earnings to close or consolidate 60 plants and lay off 7,500 employees. One of the largest acquisitions of this period was the 1996 takeover of Chicago-based Helene Curtis Industries, Inc., manufacturer and marketer of personal care products, primarily shampoo and conditioners, hand and body lotions, and deodorants and antiperspirants. Purchased for about $770 million, Helene Curtis’s portfolio included such brands as Suave, Finesse, and Salon Selectives. Another significant 1996 acquisition was that of Northbrook, Illinois-based Diversey Corporation, a maker of institutional chemical cleansers and sanitizers, and Unilever’s first foray into the industrial cleaning sector. Unilever and Procter & Gamble (P&G) began battling again in 1994, this time for supremacy in the European detergent sector. Unilever aggressively went after P&G’s market-leading brand, Ariel, with a new soap marketed under the names Persil Power, Omo Power, and Skip Power. Unilever spent $175 million developing the product and another $292 million marketing it during 1994. The product included a manganese complex molecule that Unilever claimed cleaned clothes better at lower temperatures than rival products. P&G conducted tests on Persil Power, however, which indicated that the detergent resulted in abnormal wear after as few as 15 washings. When P&G publicized its findings, Unilever sued the company for slander. However, the suit was quickly withdrawn after Unilever admitted that the detergent did indeed contain a flaw that had not been uncovered in the prelaunch testing that could damage clothes when exposed to a particular combination of dyes. Unilever reformulated the product, but not before it had turned into a public relations nightmare. In the end, the Power formula was abandoned entirely and Unilever took a £57 million write-off in its 1994 accounts. According to Andrew Lorenz, writing in the July 1996 issue of Management Today, the Persil Power debacle served as a catalyst for a fundamental management reorganization. On September 1, 1996, the three-person special committee that had run Unilever since its formation in 1929 was replaced by a seven-member executive committee composed of the chairmen of Uni-lever N.V. and Unilever PLC and five high-ranking Uni-lever executives. At the same time the company did away with a complex two-tiered management structure that included both worldwide product management groups and regional management groups. In their place was created a single team of 14 business presidents, with each president responsible for a portion of the European operations (e.g., the food and beverage Europe group), a portion of the North American operations (e.g., the home and personal care North America group), or a region of the rest of the world (Africa, Latin America, etc.). As was typical of the time, this streamlining was aimed at improving decision making by pushing authority down to a lower level. Along with this major reorganization came a change in the chairmanships, with Niall FitzGerald replacing Michael Perry as U.K. co-chairman; an Irishman, FitzGerald became the first non-English, non-Dutch to serve as co-chairman, and he also reached the post despite having been in charge of Unilever’s detergent operations during the Persil Power debacle. Continuing on the Dutch side was Morris Tabaksblat, who had replaced Maljers as Dutch co-chairman in 1994. In the late 1990s FitzGerald and Tabaksblat oversaw a comprehensive review of Unilever’s wide-ranging businesses in an effort to focus on the strongest core areas: ice cream, margarines, tea-based beverages, detergents, personal soaps, skin care products, and prestige fragrances. Several other areas were identified as “developing” core areas: frozen foods, culinary products (sauces and side dishes), hair care products, oral care products, deodorants, household care products, and industrial cleaning products. Businesses outside of these areas were candidates for disposal. In 1996 the company sold its mass-market cosmetics business, its few remaining animal feed operations, some oil-processing units, and a U.K. franchiser of Caterpillar Inc. heavy equipment. Unilever completed its largest disposal the following year, selling its specialty chemicals business, including National Starch and Quest International, to Imperial Chemical Industries PLC for about $8 billion. The sale resulted in a net profit of $4.55 billion, part of which cleared Unilever’s $2.78 billion debt; the proceeds also contributed to a war chest that expanded to $9.6 billion. The company made one large purchase in 1997, the $930 million acquisition of Kibon S.A. Indústrias Alimenticia, the number one ice cream maker in Brazil. In 1998 Unilever sold its Plant Breeding International Cambridge Limited unit to Monsanto for about $525 million. Unilever also sold its Nordsee fast-food fish chain in the late 1990s. In early 1999 Unilever spent a large portion of its war chest on a special dividend to shareholders of £5 billion ($8.1 billion). In July of that year Tabaksblat retired and was replaced as Dutch cochairman by Antony Burgmans. Two months later Unilever announced that it would eliminate about 1,200 of its brands to focus on around 400 regionally or globally powerful brands, a group that accounted for almost 90 percent of 1998 revenue. This sweeping overhaul of the product portfolio was aimed at increasing annual growth rates from 4 percent to 6 to 8 percent and at eventually reaping annual savings of £1 billion. Unilever thus ended the 20th century with a strategic plan, later called the “Path to Growth,” that included a focus on top brands within core market sectors and an emphasis on growth within developing countries. STRUGGLING IN THE EARLY 21ST CENTURYAs part of the Path to Growth initiative, Unilever sold around 150 businesses through the end of 2004, by which time the company’s top 400 brands were generating 93 percent of sales (compared to 75 percent in 1999), and it had cut 55,000 jobs and shuttered 145 factories. In January 2001, in a EUR 244 million deal, Unilever sold Elizabeth Arden to Miami Lakes, Florida-based FFI Fragrances, which later renamed itself Elizabeth Arden, Inc. Later that year Unipath Ltd., Unilever’s women’s health diagnostics subsidiary, was sold to Inverness Medical Innovations Inc. of Waltham, Massachusetts, for EUR 166 million, and Unilever also sold its North American frozen fish businesses, including the U.S.-based Gorton’s brand, to the Japanese firm Nippon Suisan Kaisha Limited for $175 million. In May 2002 Unilever sold its DiverseyLever Inc. institutional and industrial cleaning business to Johnson Wax Professional for $900 million in cash and a loan note of $241 million. Johnson Wax subsequently changed its name to JohnsonDiversey, Inc., and Unilever gained a 33 percent stake in this company as a result of the divestment. While pursuing this disposal program, Unilever simultaneously sought out new engines for growth, completing four significant acquisitions in 2000, three major and one blockbuster. Early in the year, Unilever bought Amora Maille, a producer of gourmet mustard, ketchup, sauces, and salad dressings based in Dijon, France, for EUR 715 million. In May 2000 Unilever spent approximately $2.6 billion for Slim-Fast Foods, a leading manufacturer of weight-management supplements, and also picked up the Ben & Jerry’s ice cream brand for $326 million. These deals, however, paled in comparison to Unilever’s October 2000 acquisition of Englewood Cliffs, New Jersey-based Bestfoods for EUR 26.08 billion ($22.76 billion). This deal greatly expanded Unilever’s presence in the U.S. foods market and also brought into the company fold two truly global brands, Hellman’s mayonnaise and Knorr soups and sauces. To gain regulatory approval for the deal, Unilever had to unload a number of its European dry soup and bouillon brands, including Oxo, Batchelors, and Royco. These were sold to Campbell Soup Company in a $900 million deal completed in May 2001. Unilever also put Bestfoods’ U.S. baking business, Bestfoods Baking Company, on the auction block, selling it in July 2001 to the Toronto firm George Weston Limited for EUR 1.9 billion. In July 2002 Unilever sold a portfolio of 19 North American food brands it had inherited from Bestfoods to Associated British Foods plc for EUR 383 million. Most of these were corn oil and corn products brands, including Mazola, Argo, Karo, and Golden Griddle. Although the Path to Growth program by 2003 had succeeded in improving the company’s profitability by a few percentage points, mainly via a $7 billion reduction in annual operating costs, Unilever fell well short of its top-line growth target, as sales of its leading brands grew just 2.5 percent that year. Among the disappointments were sharp declines in growth in frozen foods, household care products, fine fragrances, and Slim-Fast products. Sales of Slim-Fast’s low-calorie diet products dropped precipitously mainly because of the sudden popularity of low-carbohydrate diets. In early 2004 Uni-lever slashed its growth expectations for the following five years, and in September of that year the company was forced to issue its first profits warning, stating that it expected its percentage growth for earnings per share in 2004 to be in the low single digits rather than its previous prediction of a low double-digit percentage increase. Unilever’s shares fell on the news and were trading at about the same level as in 2000. In the wake of these disappointing results, significant changes were made to the group structure to streamline the management and leadership. In September 2004 FitzGerald retired a year early. He was succeeded as chairman of Unilever PLC by Patrick Cescau, a Frenchman and company veteran who had headed the foods division. Then the following April, Unilever replaced its longstanding dual chairmen structure with the more standard model of a nonexecutive chairman and a group chief executive. Cescau was named the first Unilever group chief executive, while Burgmans was named chairman. Hoping to create a leaner organization, the company simultaneously simplified its management structure by replacing its complex matrix of geographic and brand executives with a new system comprised of three regional chiefs (Europe, the Americas, Asia/Africa) plus heads of two operating units (foods, home and personal care), all of whom began reporting directly to Cescau. At the same time, Unilever moved to reignite sales of its top brands by boosting its investment in advertising and promotion. The company also took the painful step of writing down the value of its troubled Slim-Fast brand by EUR 591 million. Seeking to further narrow its focus on core businesses with healthier profit margins, Unilever completed two additional significant divestments. In July 2005 it sold the remainder of its perfume business, which included the Calvin Klein and Vera Wang brands, to New York-based Coty, Inc., for $800 million. The following November, Unilever sold the majority of its European frozen foods business to London-based private equity firm Permira Funds for EUR 1.72 billion ($2.19 billion). This included the Birds Eye and Iglo brands but excluded Unilever’s ice cream businesses and its frozen foods unit in Italy. In May 2007 Burgmans resigned as chairman and an outsider occupied that position for the first time. Michael Treschow, a former chief executive of two Swedish firms, Atlas Copco AB and AB Electrolux, succeeded Burgmans. A number of shareholders had been clamoring for such a move, hoping that an outsider might shake up the business. This changeover seemed to impart the desired effect, as Uni-lever in August 2007 announced aggressive new restructuring initiatives, including the slashing of 20,000 jobs—mainly in Europe—over a four-year period and plans to divest businesses with about EUR 2 billion in annual sales. The largest unit placed on the auction block was the company’s struggling North American laundry detergent business, which included the Wisk, All, and Snuggle brands. In the meantime, Cescau was in the midst of an effort to shift more of the company’s focus to markets with higher growth potential than both the United States (the firm’s largest single market) and its low-growth home base of western Europe. Additional resources were being deployed to emerging markets, such as India and China, that had young populations with fast-growing incomes. In 2006, 41 percent of Unilever’s revenues were generated in the developing world, up from 22 percent in 1990. For the first time, Unilever derived more of its sales from developing countries than from western Europe. The shift of resources appeared to make much sense, given that in 2006 Unilever’s developing-world sales grew 8 percent over the previous year, whereas sales in western Europe inched ahead only 1 percent and U.S. sales grew 2.4 percent. It nevertheless remained to be seen whether Cescau’s initiatives were sufficient to achieve the company’s stated goal of annual increases of overall revenues of between 3 and 5 percent. Maura Troester PRINCIPAL SUBSIDIARIESUnilever de Argentina S.A.; Unilever Australia Ltd.; Unilever Belgium BVBA/SPRL (Unibel); Unilever Brasil Ltda. (Brazil); Unilever Canada Inc.; Unilever Chile Home and Personal Care Ltda.; Unilever (China) Investing Company Ltd.; Unilever Services (Hefei) Limited (China); Amora Maille Société Industrielle S.A.S.; Cogesal-Miko S.A.S. (France); Lever Fabergé France S.A.S. (France; 99%); Unilever France Holdings S.A.S.; Maizena Grundstücksverwaltungs GmbH & Co. OHG (Germany); Pfanni GmbH & Co. OHG Stavenhagen (Germany); Pfanni Werke Grundstücksverwaltungs GmbH & Co. OHG (Germany); UBG Vermietungs GmbH & Co. OHG (Germany); Unilever Deutschland GmbH (Germany); Unilever Deutschland Holding GmbH (Germany); Unilever Deutschland Immobilien Leasing GmbH & Co. OHG (Germany); Wizona IPR GmbH & Co. OHG (Germany); Elais-Unilever S.A. (Greece; 84%); Unilever Hellas A.E.B.E. (Greece); Hindustan Lever Ltd. (India; 51%); P.T. Unilever Indonesia Tbk (85%); Unilever Italia SrL (Italy); Unilever Japan KK; Unilever de México S. de R.L. de C.V.; Mixhold B.V. (Netherlands); Unilever Finance International B.V. (Netherlands); Unilever N.V. (Netherlands); Unilever Nederland B.V. (Netherlands); UNUS Holding B.V. (Netherlands); Unilever Polska S.A. (Poland); Unilever SNG (Russia); Unilever South Africa Foods (Pty) Limited (59%); Unilever South Africa Home and Personal Care (Pty) Ltd.; Unilever España S.A. (Spain); Unilever Foods España S.A. (Spain); Unilever Sverige AB (Sweden); Unilever Supply Chain Company AG (Switzerland); Unilever Schweiz GmbH (Switzerland); Unilever Thai Trading Ltd. (Thailand); Unilever Sanayi ve Ticaret Türk A.S (Turkey); Lever Fabergé Ltd. (U.K.); Unilever Bestfoods UK Ltd.; Unilever PLC (U.K.); Unilever UK Holdings Ltd.; Unilever UK & CN Holdings Ltd.; Conopco, Inc. (U.S.A.); Unilever Capital Corporation (U.S.A.); Unilever United States, Inc. PRINCIPAL COMPETITORSThe Procter & Gamble Company; Nestlé S.A.; Kraft Foods, Inc.; Reckitt Benckiser plc; Colgate-Palmolive Company; Beiersdorf AG. FURTHER READINGBall, Deborah, “Can Unilever Put Bestfoods Forward?” Wall Street Journal Europe, December 4, 2002, p. A8. ________, “Shelf Life: As Its Brands Lag at Home, Unilever Makes a Risky Bet,” Wall Street Journal, March 22, 2007, pp. A1, A12. ________, “Too Many Cooks: Despite Revamp, Unwieldy Uni-lever Falls Behind Rivals,” Wall Street Journal, January 3, 2005, p. A1. ________, “Unilever Plans More Cuts as Sales Rise,” Wall Street Journal, August 3, 2007, p. A3. ________, “Unilever Shakes Up Its Management to Spur Growth,” Wall Street Journal, February 11, 2005, p. A2. ________, “Unilever Trims Growth Targets; FitzGerald to Quit,” Wall Street Journal, February 13, 2004, p. A3. Beck, Ernest, “Unilever to Cut More Than 1,000 Brands,” Wall Street Journal, September 22, 1999, p. A17. Berss, Marcia, “Unilever Cleans Up Its Act,” Forbes, April 8, 1985, pp. 94+. “Britain’s Most Admired Companies,” Economist, October 17, 1992. Caulkin, Simon, “The Colossal Cares of Unilever Revisited,” Management Today, September 2006, pp. 42+. Davidson, Andrew, “The Davidson Interview: Niall FitzGerald,” Management Today, November 1997, pp. 50, 52, 54. ________, “The Davidson Interview: Sir Michael Perry,” Management Today, May 1995, pp. 50–52, 54. Deveny, Kathleen, and Gabriella Stern, “Lever Brothers Regroups in Wake of Market-Share Losses in 1993,” Wall Street Journal, April 5, 1994, p. B11. Dubey, Suman, “Unilever Seeks to Lap Up Bulk of India’s Small, Fast-Growing Ice-Cream Market,” Wall Street Journal, September 9, 1994, p. B6. Dwyer, Paula, et al., “Unilever’s Struggle for Growth,” Business Week, July 4, 1994, pp. 54–56. Fieldhouse, D. K., Unilever Overseas: The Anatomy of a Multinational, 1895–1965, London: Croom Helm, 1978, 620 p. Foster, Geoffrey, “Making Scents Make Sense,” Management Today, June 1994, pp. 46–49. Freedman, Michael, “Pressure Cooker,” Forbes, November 1, 2004, p. 114. Gibson, Richard, and Sara Calian, “Unilever to Acquire Helene Curtis,” Wall Street Journal, February 15, 1996, pp. A3, A4. Heller, Robert, “Slipping Up En Route to the Top,” Management Today, February 1996, p. 21. Hutchinson, Roger, The Soap Man: Lewis, Harris, and Lord Leverhulme, Edinburgh: Birlinn, 2003, 236 p. Hwang, Suein L., “Unilever to Acquire Ice Cream Business Owned by Kraft Unit of Philip Morris,” Wall Street Journal, September 9, 1993, p. A4. Ilgenfritz, Stefanie, “Unilever Joins Liquid Soap Fight, Forcing Competitors to Scramble,” Wall Street Journal, August 26, 1993, p. B8. “In Search of Alchemy,” Economist, February 15, 1997, pp. 60–61. Jolly, W. P., Lord Leverhulme: A Biography, London: Constable, 1976, 246 p. Jones, Geoffrey, Renewing Unilever: Transformation and Tradition, Oxford: Oxford University Press, 2005, 447 p. Jones, Geoffrey, and Peter Miskell, “Acquisitions and Firm Growth: Creating Unilever’s Ice Cream and Tea Business,” Business History, January 2007, pp. 8–28. ________, “European Integration and Corporate Restructuring: The Strategy of Unilever, c. 1957–c. 1990,” Economic History Review, February 2005, pp. 113–39. Klaw, Spencer, “The Soap Wars: A Strategic Analysis,” Fortune, June 1963, pp. 122+. Kripalani, Manjeet, “Unilever’s Jewel: It May Be the Best-Run Outfit in India,” Business Week, April 26, 1999, p. 114E2. Levy, Liz, “Unilever Axes Fabergé Firm,” Marketing, November 2, 1989. Lipin, Steven, “Unilever to Sell Specialty-Chemicals Unit to ICI of the U.K. for About $8 Billion,” Wall Street Journal, May 7, 1997, p. A3. Lorenz, Andrew, “Unilever Changes Its Formula,” Management Today, July 1996, pp. 44, 46–48. Macqueen, Adam, The King of Sunlight: How William Lever Cleaned Up the World, London: Bantam, 2004, 328 p. Maljers, Floris A., “Inside Unilever: The Revolving Transnational Company,” Harvard Business Review, September/October 1992. Mirvis, Philip, Karen Ayas, and George Roth, To the Desert and Back: The Story of One of the Most Dramatic Business Transformations on Record, San Francisco: Jossey-Bass, 2003, 257 p. Mortished, Carl, “A Slimmer Unilever Needs Fatter Revenues,” Times (London), December 1, 2003, p. 24. “Munching on Change: Unilever’s Food Business,” Economist, January 6, 1996, p. 48. Mussey, Dagmar, “Heading Back East: Unilever Knows Way into Reunited Germany,” Advertising Age, December 30, 1990. Nayyar, Seema, “Unilever Makes Power Move on Arden,” Adweek’s Marketing Week, June 22, 1992. Neff, Jack, “P&G and Unilever’s Giant Headaches,” Advertising Age, May 24, 1999, pp. 22–24, 26, 28. Orr, Deborah, “A Giant Reawakens: Even Unilever, Which Sells $130 Million in Products a Day, Can Lose Sight of Its Customers,” Forbes, January 25, 1999, p. 52. Parker-Pope, Tara, “Unilever Plans a Long-Overdue Pruning,” Wall Street Journal, September 3, 1996, p. A13. Reader, W. J., Fifty Years of Unilever, 1930–1980, London: Heinemann, 1980, 148 p. Reed, Stanley, “Unilever Finally Knows Where It’s Going: East,” Business Week (international ed.), May 4, 1998, p. 18. ________, “Unilever Restocks,” Business Week (international ed.), August 6, 2001, p. 24. Rohwedder, Cacilie, “Detergent Wars Bubble Over in Europe: Unilever, P&G Campaigns Become Dirty Business,” Wall Street Journal, November 18, 1994, p. B7A. ________, “Unilever’s Co-Chief Faces Bumpy Road, Maps Course for Major Growth in Asia,” Wall Street Journal, May 6, 1994, p. B5B. “Slim-Fast Growth,” Institutional Investor, December 2001, pp. 26+. Smith, Geoffrey, “Blood in the Soap Dish,” Forbes, May 28,1979, pp. 36+. Thomas, Daniel, “Goodbye Mr. Fitz,” Marketing Week, February 19, 2004, pp. 26–29. Tomlinson, Richard, “One Company, Two Bosses, Many Problems: Times Are Tough for Unilever, the Anglo-Dutch Giant,” Fortune Europe, January 24, 2005, p. 56. “Unilever: Back to Minding the Store in Europe with Lines It Knows Best,” Business Week, March 14, 1983, pp. 138+. “Unilever: Slim Fast,” Economist, February 12, 2005. Wilson, Charles, The History of Unilever: A Study in Economic Growth and Social Change, 2 vols., London: Cassell, 1954. ________, Unilever, 1945–1965: Challenge and Response in the Post-war Industrial Revolution, London: Cassell, 1968, 290 p. Zinn, Laura, “Beauty and the Beastliness,” Business Week, June 29, 1992. |
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"Unilever." International Directory of Company Histories. 2008. Encyclopedia.com. 31 May. 2012 <http://www.encyclopedia.com>. "Unilever." International Directory of Company Histories. 2008. Encyclopedia.com. (May 31, 2012). http://www.encyclopedia.com/doc/1G2-2690500101.html "Unilever." International Directory of Company Histories. 2008. Retrieved May 31, 2012 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2690500101.html |
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