Case Study Unilever

This case study chronicles Unilever efforts at restructuring, divesting, acquisition, and general streamlining of its worldwide operations. These operations, in 2000, encompassed 1,600 brands in 88 countries. These products are mostly food, personal care, and household products. Around that same year, Co-chairmen Niall FitzGerald and Antony Burgmans decided that Unilever needed to make some rather drastic changes in order to remain competitive. More importantly that competitiveness was the importance that the company maintained ever increasing profitability. The co-chairs planned to bring about this much needed change via institution of an ambitious 5 year plan. This plan was dubbed the “path to growth” strategy.

This 5 year plan would have many focuses aimed at making Unilever more profitable. The key strategies to be implemented were:

• Reduce portfolio from 1600 to 400 core brands by 2004. This would allow the concentration of assets in marketing, production and distribution to be concentrated. This would also eliminate underperforming brands.

• Increase sales growth to around 5-6% on top performing brands,

• Increase overall margins to over 16%.

This initiative wasn’t expected to be cheap. It was projected to cost roughly 5 billion Euros and 25,000 employees. It was hoped that in the end it would more than pay for itself with better strategic stance, more efficient distribution, consolidated production, and generally increased overall efficiency.

Unilever began the first 12 months of its restructuring with new acquisitions. It acquired industry leaders in their market segments. These companies included: Slimfast diet foods, Ben & Jerry’s ice cream, and the conglomerate Bestfoods. Bestfoods alone had 1999 sales of over $8 billion. The Bestfoods acquisition was pivotal to the long term future success of Unilever. Successful integration of their operations was not an option, it was a necessity. Along with these new acquisitions, they chose to divest in the following brands: Elizabeth Arden cosmetics, several fragrance lines, much of its baking brands, and its European dry soups and sauces business. The latter sale was forced to ease the EU’s fears of a monopoly by its acquisition of Bestfoods, who held the majority of sales in that category.

It was widely felt by management at Unilever that these restructuring efforts would serve as cornerstones on their new initiative. In my opinion they were indeed on the right track by cutting off all of the �dead weight’ of underperforming/problem brands. This would allow them to focus efforts on those designated core brands that could be pushed to be sales leaders in their respective markets. I think that pre-2000 Unilever fell victim to the old maxim “Jack of all trades and master of none” Their new initiative showed great promise in redressing this issue and putting the forward momentum upon it that it would need to remain competitive in the 21st century.

Around the third quarter of 2003 Unilevers management used several criteria (as presented in the text case study) to buttress their message that the plan was thus-far successful and on track:

• Leading brands, including new acquisitions accounting for 92% of their total revenues, up from 75% in 1999. Sales in this group had risen to 5.4.

• Divesture of 110 brands, with sales revenues of over 6 billion euros.

• Savings thus-far of over 3 billion euros.

• Net debt reduced from 26.5 billion at the end of 2000 to 16 billion euros as of third quarter of 2003

All of these fact and figures point to the successful goal keeping thus far of the path to growth strategy. All of the goals originally reached for had thus far been achieved. When I examine the numbers, a key question comes to mind with regards to overall Unilever sales growth rates amongst their leading brands. From 2002 to 2003 the overall sales average amongst leading brands fell from 5.4% to 3.1. I think this is a significant drop, and it may possibly be