unilever

a troubled giant
SOURCE : UNILEVER.COM, 2009
management

SOURCE : UNILEVER.COM, 2009

SOURCE : UNILEVER.COM, 2009
SOURCE : UNILEVER.COM
SOURCE : UNILEVER.COM
background note
 unie
ØIn 1872, two Dutchmen, Jurgens and Van Der Bergh
had ventured into the margarine business

ØIn 1927, they decided to merge to form two

companies, Margarine Unie NV, based in the
Netherlands and Margarine Union Ltd, based in the UK

strategy : growth

tool : merger
 lever
ØWilliam Hesketh Lever founded ‘Lever Brothers’ in 1885
ØBy 1887, introduced ‘SUNLIGHT’, the world’s 1st packaged laundry
soap
ØLever & Co. was making 450 tons of Sunlight soap a week
ØHe expanded his business from UK to Australia, North America
and other parts of Europe
ØIn 1890, Lever & Co became a limited company –LEVER
BROTHERS LTD, by 1894, they went PUBLIC
ØDiversified into other businesses, acquired Pears soap and Wall’s
ØLaunched its innovative product , VIM

strategy : growth

tool : acquisition
unie lever

unilever group
UNILEVER PLC UNILEVER N.V.

B.O.D. B.O.D.
 problems with the
structure
ØUnable to sustain the great depression

ØIncapable of striking a balance between British and Dutch

interests

ØLack of co-ordination between the board of directors of the

two holding companies

ØTwo Masters - Confused Followers (Coalition Governance)

 1930 to 1979
ØIn 1937 , acquired Thomas J. Lipton
ØIn 1944, acquired Pepsodent
ØIn 1957, acquired Bird’s Eye
ØIn 1961, acquired Good Humor
ØIn 1978, acquired National Starch and Chemical
Corporation

strategy : rigorous growth

tools : integration ( fwd & back)

acquisition
diversification ( related & unrelated)
organiZational structure
(1930 to 1979)

ØConcept of strategically independent units- local initiative and

decentralized control

ØA special, 3-member committee was formed in September 1930,

above the two boards of directors of the company

ØMatrix organizational structure was opted

 SPECIAL COMMITTEE (3)

UNILEVER PLC UNILEVER N.V.

B.O.D. B.O.D.
 problem with the
structure
Concept of strategically independent units led
to high cost structure from duplication of
manufacturing facilities at various locations
 1980 to 1995
“the sleeping giant”
ØRationalized manufacturing approach
ØProduct divisions established to co-ordinate regional operations
ØFocus on the following four industries, as a part of core strategy
– Foods, Personal Care, Home Care and Specialty Chemicals,
divesting from all other businesses
ØBetween 1992-1996 , Unilever made around 100 acquisitions,
during 1995 alone the company acquired 38 companies
ØThe company decided to target D&E markets

strategy : focused growth

tools : divestment
acquisition
 list of acquisitions list of divestments

Ø1984 - BROOKE BOND Ø1980 - SERVICE ( TRANSPORT)

Ø1986 - NAARDEN & ANCILLARY BUSINESS
INTERNATIONAL Ø1985 - PALM LINE, SHIPPING
Ø1987 - CHESEBROUGH-
COMPANY
POND’S
Ø1989 - FABERGE
Ø1990 - PLANT BREEDING &
Ø1989 - ELIZABETH ARDEN OTHER AGRICULTURAL
Ø1989 - CALVIN KLEIN’S PRODUCTS
FRAGRANCE BUSINESS Ø1990 - PACKAGING &
Ø1990 - NORDSEE FAST-FOOD PROFESSIONAL
Ø1993 - EMPIRE OF CLEANING PRODUCTS
CAROLINA INC.
Ø1993 - PHILIP MORRIS
KRAFT GENERAL
FOODS UNIT
 before after

BUSINESSES BUSINESSES

FOOD HC

PC SC
 problems with the
structure
ØThe unending acquisitions made the operations cumbersome and
the company became inflexible to adapt to the market dynamism
ØPerformance drift
ØOrganizational fatigue
ØExcess of bureaucracy
ØConfusion – of accountability and responsibility
ØConflicting priorities in the special committee
ØDecision making became constipated
ØStructural detritus , accumulated over decades
ØAbsolute chaotic condition
ØExtra levels of complexity were imposed on an already convoluted
structure
 1996 to 1999
breakthrough restructuring
Ø3- Member special committee which existed since the birth of
Unilever got dissolved , to give way to a 7- Member Executive
committee
ØThe company appointed its 1st Chairman (Niall FitzGerald, an
Irishman) not carrying a British or a Dutch passport
ØTwo layers of the organizational structure consisting of the world-
wide business coordinators and the network of Regional
Directors were swept away to form a single team of 14 business
Presidents
ØCompany’s operations were grouped by product , instead of
geographical regions
ØFrom Centrally – Driven expansion to branched expansion
…
ØUnilever wanted to grow as much by local
pull as by global push
ØFocus on Company’s Core Competences
ØIntroduction to the new management
incentive system (Variable Pay)

strategy : sustainability

tool : restructuring
 acquisitions
Ø1996- HELENE CURTIS INDUSTRIES, INC., PERSONAL CARE
PRODUCTS
Ø1996- NORTHBRROOK DIVERSEY CORP., CHEMICAL CLEANSER &
SANITIZER
Ø1999- KIBON S.A. INDUSTRIES ALIMENTICA, ICE-CREAM
COMPANY

divestments
Ø1996- CATERPILLAR INC., HEAVY EQUIPMNET, U.K.
FRANCHISEE
Ø1997- NATIONAL STARCH & CHEMICAL CORPORATION
Ø1998- PLANT BREEDING INTERNATIONAL CAMBRIDGE LTD.
 EXECUTIVE COMMITTEE (7)

UNILEVER PLC UNILEVER N.V.

BP’s BP’s
 problems with the
structure
ØUnilever’s Market Capitalization of about £ 51 Billion (~ $ 82 Billion) in
June 1999 shrank to £ 20 Billion by January 2000 (Stock prices
Plunged)
ØCompany’s Existing brand structure had lost its Focus (Too many
Brands)
ØUnilever was criticized for spending large amounts of funds due to
frequent restructuring over the years
ØUnilever’s market share was taking a big time hit (Dip)
ØThere was no Fit between the company’s organizational structure and
its strategies (Persil Power shook the giant to its foundations)
ØIt was believed that, every big organization that is running into trouble
needs a crisis to convince it of the necessity for fundamental change,
and that for Unilever this situation had already arrived long ago
 2000 to 2004
path to growth strategy
ØIn February 2000, the company announced a € 5 Billion Five –
Year Growth Strategy
ØUnilever was “Shrinking to Grow”
ØLaying off over 25, 000 employees ( ~ 10% of the employee
base)
ØUnilever was split into two, separate global units : Foods and
Home & Personal Care (HPC), headed by two executive
Directors separately
ØUnilever reorganized its 300 operating companies into 10
Regional Groups
ØUnilever Further Decentralized its Control over its subsidiaries
ØUnilever Shut down more than 100 manufacturing units for
cost reduction
 …
ØMore than half of its Top Executives were replaced with young
blood
ØBrand Portfolio of 1, 600 was pruned to 400 (For better focus
on leading brands)
ØCompany came up with a Brand Focus Strategy “Nourishing the
Core”
ØUnilever started to exploit brands within the existing product
categories but outside their scope

strategy : consolidation

tool : restructuring
 UNILEVER- REGIONAL GROUPS
Division Regional Groups
Foods Foods north America, Middle east and Turkey
Unilever Bestfoods Asia
Unilever Bestfoods Latin America
Unilever Bestfoods North America & slimfast Worldwide
Unilever Bestfoods , Europe

Home & Personal Care Home & Personal care, Asia

Home & Personal care, Europe
Home & Personal care, North America
HPC North Africa, Middle East & Turkey
HPC Division, Latin America

SOURCE: WWW.UNILEVER.COM, 2009

 acquisitions
ØIn 2000 - BESTFOODS , U.S.A.
ØIn 2000 - GROUPO CRESSIDA CENTRAL AMERICA FOODS
CORPORATION, CENTRAL AMERICA
ØIn 2000 - AMORA MAILLE, CULINARY PRODUCTS, FRANCE
ØIn 2000 - JABONERIA NA, FOODS & HPC
ØIn 2000 - BEN & JERRY’S HOMEMADE INC., ICE CREAM
ØIn 2000 - CRESSIDA, FOODS, SOAPS & DETERGENTS
ØIn 2000 - CODEPAR/SPCD , HPC
ØIn 2000 - SLIM FAST, SLIMMING PRODUCTS , U.S.A
ØIn 2000 - ENGLEWOOD CLIFFS, FOODS, NEW JERSEY
 before after

BUSINESSES
(FOOD & HPC) BUSINESSES

FOOD HPC

ED ED
 benefits of this
strategy
ØFocused and Effective streamline decision making
ØSales shot up by 16 %
ØUnilever’s Share price had recovered by 30 %
ØCompany’s Turnover rose from € 40, 977 Million in
1999 to € 47, 582 Million in 2000
ØSupply Chain Restructuring saved € 1.75 Billion
ØAnnual Top line Growth of about 4 % to 5 % was
achieved
ØAverage Earnings Per Share increased by 9 %
 UNILEVER FINANCIALS (IN € MILLION)
BY GROUP
1998 1999 2000 2001 2002
Group Turnover 40,437 40,977 47,582 51,514 48,270
Group Operating Profit:

Group operating Profit BEIA 4,293 4,595 5,729 7,149 7,165

Exceptional items 125 (269) (2,113) (588) (879)
Amortization Of Goodwill and (8) (23) (435) (1,387) (1,245)
Intangibles
Total Gross Operating Profit 4,410 4,303 3,181 5,174 5,041
Income from Fixed Investments 37 52 53 96 111
Interest 156 (14) (632) (1,646) (1,173)
Profit On Ordinary Activities 4,603 4,341 2,602 3,624 3,979
Before Taxation
Profit On Ordinary Activities 3,088 2,972 1,320 2,077 2,441
After Taxation
Net Profit 2,944 2,771 1,105 1,838 2,129
Source : Unilever Annual reports 1998 - 2002
 Y GEOGRAPHIC REGIONS
GEOGRAPHIC REGION 1998 1999 2000 2001 2002
Group Turn Over:
Europe 18,165 18,040 18,967 20,119 19,573
North America 8,417 8,838 11,631 13,767 12,446
Africa, Middle East and Turkey 3,034 3,048 3,296 3,191 3,139
Asia and Pacific 5,803 6,723 8,038 7,846 7,679
Latin America 5,018 4,328 5,650 6,591 5,433
Total 40,437 40,977 47,582 51,514 48,270
Group Operating Profit:
Europe 2,254 2,131 1,693 2,689 1,750
North America 942 847 48 1,092 1,435
Africa, Middle East and Turkey 268 302 321 202 286
Asia and Pacific 457 642 776 862 1,077
Latin America 489 381 343 328 493
Total 4,410 4,303 3,181 5,174 5,041
Source : Unilever Annual reports 1998 - 2002
 BY OPERATIONS
OPERATION 1998 1999 2000 2001 2002
Group Turn Over:
Food 20,919 20,339 23,898 28,155 26,937
Home & Personal Care 18,783 19,781 22,825 22,739 20,801
Other Operation 735 857 859 620 532
Total 40,437 40,977 47,582 51,514 48,270
Group Operating Profit:
Food 1,801 1,788 1,735 2,303 2,185
Home & Personal Care 2,093 2,361 1,415 2,823 2,814
Other Operation 516 154 31 48 42
Total 4,410 4,303 3,181 5,174 5,041
Source : Unilever Annual reports 1998 - 2002
 2003
unwelcome loss of weight for
unilever
ØSales dropped by 15 %
ØProfits fell by 13 %
ØAnnual Top line Growth of about 4 % to 5 % came
down to 3 %
ØShare Price fell by 7 %
ØCompany was unable to cope up with the
Competitive Market Dynamics
 2004 to 2010
growth to vitality strategy
ØBrand Portfolio of 400 Brands would be reduced to 40 Mega
World Brands, the retained ones would have sales in excess of a
Billion Dollar
ØHigh Concentration on Developing and Emerging markets (D & E)
Ø3 to 5 % of Organic Growth was targeted
ØMargin Enhancement through portfolio mix
ØBusiness on strict Value creation criteria
ØFirst Non – Executive Chairman was appointed
ØConcept of “ONE UNILEVER”
ØUnilever started soft selling under this ‘VITALITY’ strategy
strategy : focused growth

tools : divestment
acquisition
 UNILEVER SALES GROWTH
7%

6%

5%

4%

3%

2%

1%

0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007
Turnover & Profit Last 12 years
Figure in € mln Turnover Operating Net Profit
Profit
1996 39,840 3,412 1,908
1997 42,926 3,432 4,957
1998 40,437 4,410 2,944
1999 40,977 4,303 2,771
2000 47,582 3,302 1,105
2001 51,514 5,174 1,838
2002 48,270 5,041 2,129
2003 47,421 6,066 2,942
2004 37,168 5,721 2,755
2005 38,401 5,074 3,305
2006 39,642 5,408 3,685
2007 40,187 5,245 4,136
SOURCE : UNILEVER ANNUAL REPORTS 1996 - 2008
 2008
restructuring again
ØAnnounced 20, 000 Job Cuts

ØCombined its two Global units Food & HPC into a

single one

ØFocus on personal care Products Division

unilever & few close
competitors

a comparative study
250000

ALL FIGURES IN MILLION USD, MARCH 2008

200000

150000
MARKET CAPITAL
SALES
OPERATING INCOME
100000 NET INCOME

50000

0
UNILEVER P&G NESTLE KRAFT
SHARE LISTINGS, EPS &
DIVIDENTS

SOURCE : UNILEVER.COM, 2008

 whats in the news
acquisitions in 2009
ØUNILEVER ACQUIRED SARA LEE’S PERSONAL CARE &
EUROPEAN DETERGENT UNIT FOR $ 1.9 BILLION,
GAINING SANEX SHOWER GEL

ØIN ADDITION , UNILEVER IS BUYING SEVERAL OTHER

STRONG REGIONAL BRANDS LIKE RADOX BUBBLE BATH ;
DUSCHDAS, GERMAN SHOWER GEL & SWITZAL,
BABY SHAMPOO
 references
üRenewing Unilever – Transformation and Tradition, Geoffrey Jones
üMunching on Change, Economist, January 06, 1996
üUnilever to create “Power Brands”, http://news.bbc.co.uk, September
21, 1999
üRohan Mike, Refocused Unilever on Global Acquisition Spree, www.
Itsfood.com, January 04, 2000
üUnilever Changes Track, http://news.bbc.co.uk, February 22, 2000
üUnilever to Axe 25,000 Jobs in Cost Overhaul,
www.industrysearch.com.ai , February 23, 2000
üShrinking To Grow, Economist, February 26, 2000
üHarvilicz Helen, Unilever Undertakes Massive Restructuring, Chemical
Market Reporter, February 28, 2000
üStevens Robert, Unilever to Shed 10 Percent of Workforce in Global
Restructuring, www.wsws.org, March 01, 2000
üFat & Thin, Economist, April 15, 2000
 ? ? ? ?
??? ? ???
? ? ?? ??
? ?? ? ?
1. What was the need for unilever to
have separate legal identity but
operate as a single entity ?? Can
unilever plc and unilever nv fuse, in
future ???
2. What was the reason for, the need
of frequent restructuring at unilever
??
3. Have unilever’s top brands paid the
debt for the Structural detritus of
unilever ???
4. Did unilever’s investment of £ 5
billion on “pgs” payoff ???
5. Had unilever grown more than its
cradle ??
 6. Should unilever opt for umbrella
branding ever in future ? If yes, why??
If no, why???
thanks…