Unilever’s Path to Growth Strategy: Is It
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Transcript of 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
Company Overview Environmental Analysis Financial Analysis Strategic Issue Recommendations Implementation Q & A
Agenda
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
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
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
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
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
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.)
57%
43%
Foods Division
Home and Personal Care
Revenues: Product Segmentation
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
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
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
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?
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?
Strategic Issue
What adjustments, both internally and externally, should Unilever make to
rebuild a strong and focused competitive strategy?
1. Reorganize and streamline Unilever’s organizational structure.
2. Implement “Unilever Believer” product and brand extensions.
Recommendations
Recommendation 1
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.
One UnileverAn initiative to create an
overall umbrella brand across all Unilever’s brands that will
eventually consolidate various businesses under one name
•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
•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.
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
Recommendation 2
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
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
Products of Focus
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
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
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
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
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