unilever’s path to growth strategy: is it

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Unilever’s Path to Growth Strategy: Is It Working? Bianca Cole ~ Reginald Green ~ Kameela McClinton ~ Stephanie Richardson ~ Derek Webster

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Page 1: Unilever’s Path to Growth Strategy: Is It

Unilever’s Path to Growth Strategy:

Is It Working?

Bianca Cole ~ Reginald Green ~ Kameela McClinton ~ Stephanie Richardson ~ Derek

Webster

Page 2: Unilever’s Path to Growth Strategy: Is It

Company Overview Environmental Analysis Financial Analysis Strategic Issue Recommendations Implementation Q & A

Agenda

Page 3: Unilever’s Path to Growth Strategy: Is It

Created in 1930 as result of a merger Key player in the food and

household products industry Maintains dual headquarter/dual

chairperson approach Launched Path to Growth strategy

(2000) to revive the company Historically grew through acquisitions

Company Overview

Page 4: Unilever’s Path to Growth Strategy: Is It

Competitor Comparison

Top Segment

Top Brand

CEO

Stock per share

Growth

Revenues

Revenue Growth

International

Business Segments

Employees

CG/Foods Consumer care Food Food

Dove Tide Mac & Cheese Kit Kat

A. Burgmans

$66.03

15.58%

42,942M

-11.93%

100+

A.G. Lafley

234000

$53.76

9.25%

28.2 BL

19%

42

5

110000

R. Deromedi

$30.70

P. Letmathe

8.2%

66.90

11.23%

$69 B$31,010 M

4.3%% -1.93%

150+ 86

5

10600

6

253000

3

Page 5: Unilever’s Path to Growth Strategy: Is It

S.W.O.T. Analysis

Strengths Weaknesses Recognized as a global company Strong brand portfolio Strong relationship with retailers Economies of scale

Dual leadership Not connecting with customers Inefficient management of brands Reduced spending for R & D Inability to maximize acquisitions Decrease in revenues

Opportunities Threats Changing consumer preferences Increasing need for healthy products

Strong Competition Increasing store brands Tougher Business Climate Exchange rates

Page 6: Unilever’s Path to Growth Strategy: Is It

Rationale

Attractive Drivers

Unilever contributions

•Build strong portfolio•Strategically attractive category

•Strong customer reach•20% annual growth rate•Strong sales and distribution network•Opportunity for product

•Would make Unilever world’s largest ice cream products maker•Premium prices•Strong brand equity

•10th largest U.S. based food products companies•History of growth in revenues and earnings•Strong global position

SlimFast BestfoodsBen & Jerry’s

•$2.3 billion cash•International presence

•$326 million•Competencies in the industry

•$20.3 billion euro cash; assumption of net debt•Operating efficiency•Similar portfolios and geographic coverage

Page 7: Unilever’s Path to Growth Strategy: Is It

40,000

42,000

44,000

46,000

48,000

50,000

52,000

54,000

2000 2001 2002 2003

Revenue

Revenues Net Income

0

500

1000

1500

2000

2500

3000

3500

2000 2001 2002 2003

Net Income

Financial Analysis

Page 8: Unilever’s Path to Growth Strategy: Is It

0

0

0

0

0

0

0

0

2000 2001 2002 2003

Net ProfitMargin

Net Profit Margin Employees

210000

220000

230000

240000

250000

260000

270000

280000

2000 2001 2002 2003

Employees

Financial Analysis (cont.)

Page 9: Unilever’s Path to Growth Strategy: Is It

57%

43%

Foods Division

Home and Personal Care

Revenues: Product Segmentation

Page 10: Unilever’s Path to Growth Strategy: Is It

Why Path to Growth Strategy

Years of slow performance Lack of sound corporate

strategy Numerous low-volume brands Small global presence compared to

competition Mediocre performance in

emerging markets

Page 11: Unilever’s Path to Growth Strategy: Is It

5 year growth plan Reduce portfolio to 400 “core”

brands Focus R & D and advertising on

leading brands Concentrate on product

innovation to fuel internal growth

Grow through acquisitions

Elements of Path to Growth

Source: Crafting and Executing Strategy

Page 12: Unilever’s Path to Growth Strategy: Is It

Objectives of Path to Growth

Expectations

Achieve double-digit EPS growth

Secure a better competitive position in global food and household

Build brand value to gain pricing power

Top-line sales growth of 5-6% annually

Increase operating profit margins 11% to over 16%

Plan to be accomplished by year end 2004

Strategic Targets

Page 13: Unilever’s Path to Growth Strategy: Is It

Successfully trimmed unsuccessful brands

Leading brands increased sales from 75% to 93%

12 brands with sales of 1B+ Consistent growth in Home

& Personal Care Improved overall quality

and growth profile of Food portfolio

Yes…

Global procurement programs have delivered 2.4B, excess of 1.6B target

Improved capital efficiency

Successful integration of Bestfoods acquisition

Operating assets have improved by 9%, exceeding 6% target

Is it working?

Page 14: Unilever’s Path to Growth Strategy: Is It

Reported a net loss of $318M

In 2004, underlying sales grew by only .4%, leading brands by .9%

Issued 1st ever profit warning ahead of third quarter results, 3% decline

Lagging behind competitors in terms of marketing and innovation

No…. “Unilever was getting there, but getting there too late”

Is it working?

Failure to increase advertising and marketing efforts

Still lack focus and effective strategy execution

The company remained too local and fragmented

Unilever plans to discontinue the “Path to Growth” Strategy

So what’s next?

Page 15: Unilever’s Path to Growth Strategy: Is It

Strategic Issue

What adjustments, both internally and externally, should Unilever make to

rebuild a strong and focused competitive strategy?

Page 16: Unilever’s Path to Growth Strategy: Is It

1. Reorganize and streamline Unilever’s organizational structure.

2. Implement “Unilever Believer” product and brand extensions.

Recommendations

Page 17: Unilever’s Path to Growth Strategy: Is It

Recommendation 1

Page 18: Unilever’s Path to Growth Strategy: Is It

Recommendation 1

Strategy Justification

Unilever maintained two business entities, dual chairperson approach

Unilever Group owns Unilever Plc and Unilever NV

List stock separately and share board of directors

Management typically wear two/three hats

Board and business responsibilities conflicted

Company remained two local and fragmented

Recognize the need to streamline

leadership and management structure

Reduced effectiveness and slowed the decision making process.

Page 19: Unilever’s Path to Growth Strategy: Is It

Unilever Plc Unilever NV

One Unilever

Page 20: Unilever’s Path to Growth Strategy: Is It

One UnileverAn initiative to create an

overall umbrella brand across all Unilever’s brands that will

eventually consolidate various businesses under one name

Page 21: Unilever’s Path to Growth Strategy: Is It

•Margarines, spreads, oils•Frozen Foods•Icecreams •Tea-based beverages•Culinary•Health and Wellness•Fragrances•Deodorants/toiletry•Oral Care•Soaps, lotions, skin care•Laundry•Househould care•Cleaning Products

•Ireland •Korea•Neverlands•Italia•US

•Global Enabling Team •Regional Leadership Team •Global Process Owners

•Customer Business Development•Finance•Human Resources•IT•Market Research•Government Relations•Product Supply•Public Affairs

Cross Functional Management Team

Global Business UnitsGlobal

Business ServicesCorporate Functions

MarketDevelopmentOrganization

One Unilever

Page 22: Unilever’s Path to Growth Strategy: Is It

•Margarines, spreads, oils•Frozen Foods•Icecreams •Tea-based beverages•Culinary•Health and Wellness•Fragrances•Deodorants/toiletry•Oral Care•Soaps, lotions, skin care•Laundry•Househould care•Cleaning Products

•Ireland •Korea•Neverlands•Italia•US

•Global Enabling Team •Regional Leadership Team •Global Process Owners

•Customer Business Development•Finance•Human Resources•IT•Market Research•Government Relations•Product Supply•Public Affairs

Cross Functional Management Team

Global Business UnitsGlobal

Business ServicesCorporate Functions

MarketDevelopmentOrganization

One Unilever

KEY TO SUCCESS

A simpler management structure will increase accountability

and speed the decision making process.

Page 23: Unilever’s Path to Growth Strategy: Is It

Provides a greater clarity of leadership, responsibility, and accountability

Allows Unilever to focus on the needs of their customers and consumers thus reigniting growth and increasing sales potential

Provides the ability to leverage scale of operations

Create a strategic platform for brand management

Recommendation 1Deliverables

Page 24: Unilever’s Path to Growth Strategy: Is It

Recommendation 2

Page 25: Unilever’s Path to Growth Strategy: Is It

Unilever Believer

Program that focuses on brand initiatives to the consumer

Lets the consumer know more about the product and its uses

Objective: Bring top of the mind awareness

Strategy: Use advertising that connects with consumer needs

Believe in Unilever

Page 26: Unilever’s Path to Growth Strategy: Is It

Recommendation 2

Strategy Justification Consumers demand high quality

products that both are convenient and delicious

Consumers look for new ways to use products

More females are working full time jobs Large population of single-parent

households Increase consumer focus on health

and nutrition

Page 27: Unilever’s Path to Growth Strategy: Is It

Products of Focus

Page 28: Unilever’s Path to Growth Strategy: Is It

Lipton Extension

Energy drinks jumped 56% in sales last year

Market has exceed $100 million

Main Competitor: Red Bull

Positioning Statement: A Healthier Alternative to Energy Drinks

Focus on Energy Drinks

Page 29: Unilever’s Path to Growth Strategy: Is It

Lipton Extension

Product: Lipton Lift Target Market: Young adults 18-32Uses: stay up all night and/or start a night outMain Ingredients: Caffeine, Vitamin B, Guarana

Advertisements: Highlight healthier ingredients of the product while showcasing its ability to give energy and revitalize body

Page 30: Unilever’s Path to Growth Strategy: Is It

Featured advertisements on how consumers use Ragu

EXAMPLE of new product usage A mom showing how she uses Ragu as a

base for her chili Call to Action: How Do U Ragu contest &

website with new uses The created new uses will get our consumer

involved in being a Unilever Believer

How Do You RAGU?Marketing & Advertising

Page 31: Unilever’s Path to Growth Strategy: Is It

Focus on Consumers on the Go- Ragu Lunch Pack- -Ragu sauce - -Cooked spaghetti- -Garlic Bread

How Do You RAGU?Product Line Extension

How do I Ragu… On the Go

Page 32: Unilever’s Path to Growth Strategy: Is It

Delivers innovative products that capitalizes on changing consumer preferences

Allows Unilever to focus on the needs of their customers and consumers thus reigniting growth and increasing sales potential

Provides a strong competitive platform against major competitors and private label brands

Recommendation 2Deliverables