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Unilever

Last edited by crocodyl on April 22, 2008 - 2:57pm
Company Snapshot: 

The Unilever Group consists primarily of Unilever NV and Unilever PLC and is one of the world’s top makers of packaged consumer goods and sells products like deodorants, fragrances, soap, margarine, tea and frozen foods all over the world. Unilever controls subsidiaries in at least 90 countries and is one of the world’s top food firms. It is also one of the worlds largest packaged consumer goods company, with Procter & Gamble. Unilever does not retail under its own name, doing most of it's business under brand names such as Jerry’s, Lipton, Slim-Fast, Iglo, Unox, Becel, and Lever2000. They’re all part of the "Unilever armada of brand names".

Global Fortune 500 position: 
120
Ownership status: 
Publicly traded
Number of employees worldwide: 
180,000
Chief executive officer: 
Patrick Cescau
Website: 
http://www.unilever.com/
Corporate accountability
Accountability overview: 

Genetically Modified

Unilever was the first multinational company that started using genetically modified (GM) products. Their "Beanfeast" range (which is now being sold) contained GM soya. A tiny asterisk attached to the ingredient list was the only mark to warn consumers. Bachelors Beanfeast contained soya beans which had genetic material from a virus, a bacteria and even the petunia plant inserted into them. Unilever received more than 3,000 phone calls from angry consumers in the UK. By spring 1999, it was forced to withdraw Beanfeast, its flagship GM food product and to agree to phase out all GM products.

Slim-Fast

Slim-Fast was bought by Unilever in 2000, and is now one of Unilever’s top-performers. Unilever CEO FitzGerald likes to say he bought the ice-cream company Ben & Jerry's on the same day he bought Slim-Fast because "one makes you fat, and the other makes you thin".

Slim-Fast sells shakes (milk- or soy-based), drink powders, and snack bars through retailers in the US and Europe under the Slim-Fast and Ultra Slim-Fast names. As these names suggest, Slim-Fast capitalizes on the needs of weight-conscious consumers. It has marketed products aggressively, hiring celebrity endorsers such as former baseball manager Tommy Lasorda and TV's Kathie Lee Gifford; Lauren Hutton is the company's latest spokesperson.

Omo Detergent

Omo is a blue detergent powder launched in 1954, and became the Unilever spearhead in the synthetic detergent market. New Blue Star Omo was introduced at the end of March 1963. Today, Unilever is aggressively promoting Omo all over Asia and Africa, packaged in quantities down to 35 gram. Unilever’s brands Persil, Omo and Skip (other Unilever brands include the pre-war brand Sunlight, Sun, Vim and Surf) are engaged in fierce competition with Procter & Gamble's washing powder brands for pole position in just about every world market.

P&G was the first to use one brand name for its leading detergent (Tide) in some countries and another brand name, with a different package (Ariel) in the others. Unilever copied this policy. The company markets Surf in many countries and Omo in the remainder. The products are almost identical. But the packages are dissimilar enough that retailers stock Surf in the same section with Omo, often at the same price, so consumers must believe they are different products.

Door to Door Sales

Salesmen in Unilever uniforms act as mobile advertisements, and by travelling door-to-door develop personal relationships with shopkeepers. They are paid extra if they hit targets. Tanzania has 100,000 retail outlets across the country, in 9000 villages. With half the population living below the poverty line, consumers buy rice, maize and flour in tiny quantities every day from mini kiosks in lanes that are too narrow for vehicles. While Unilever delivers goods by van to big shops in towns, it had to find another form of distribution for outlets in inaccessible villages. In December the company came up with a pilot scheme to address this problem: the "bicycle brigade".

Salesmen are given bicycles with large boxes welded onto the back to transport small packs of detergent powder, margarine, soap and oil. Each salesman visits about 20 to 30 shops, following a fixed itinerary. Small Omo detergent packs and Blue Band margarine have become market leaders, and Key soap, launched last December, has wrested 15% of a highly competitive market in just eight months.'

Environment and product safety: 

In India Unilever has been accused by Greenpeace of double standards and shameful negligence for allowing its Indian subsidiary, Hindustan Lever, to dump several tons of highly toxic mercury waste in the densely populated tourist resort of Kodaikanal and the surrounding protected nature reserve of Pambar Shola, in Tamilnadu, Southern India.

Greenpeace activists and concerned residents cordoned off a contaminated dump site in the center of Kodaikanal to protect people from the mercury wastes that have been recklessly discarded in open or torn sacks by Hindustan Lever which manufactures mercury thermometers for export, mainly to the United States. According to Hindustan Lever, from there, the thermometers are sold to Germany, UK, Spain, USA, Australia and Canada. The factory, set up in 1977, was a second-hand plant imported from the United States, after the US factory was shutdown for ‘unknown reasons’. Workers at the factory are offered no protection from the mercury spills and several workers have complained of health problems which, they allege, is caused by their exposure to mercury in the workplace. Mercury is highly poisonous and exposure to even the small amount through air, water or skin, exerts severe effects on the central nervous system (brain) and kidneys. Fetuses and young children are particularly vulnerable to poisoning by mercury.

Anti-competitive and consumer protection: 

Misleading marketing

The UK Advertising Standards Authority (ASA) has recently accused Unilever for false advertising. The ASA ruled that Unilever misled British consumers in the way the company presented the health benefits of its cholesterol-lowering margarine, Flora pro-activ. According to ASA, Unilever’s Van den Bergh Foods unit overstated the benefits of Flora pro-activ in one press advert that claimed it could reduce LDL cholesterol by 10 to 15 percent. After the ASA ruling, Unilever agreed to make the required changes and not advertise in the same way again.

The Tea Market

Unilever is the world’s largest tea company, and owns 18,000 hectares of plantations in Kenya, Tanzania and India. It controls 20% of the market (most likely these 1999 figures have changed), through its ownership of the Brands Lipton’s and Brooke Bonds. Consequently, it has major power over the tea price. In the mid 80’s, when the Indian tea price started to rise, Unilever and other corporations acted to bring it down by temporarily boycotting Indian tea. When the Indian government tried to set a minimum export price, the multinationals collectively withdrew from the market, forcing the government to retreat, and slash the price.

Political influence: 

Unilever was one of the 450 multinationals taking part in the Geneva Business Dialog, a meeting, taking place late September 1998, which marked the beginning of a growing (increasingly formalized) relationship between the UN and the ICC. The Geneva Business Dialog was convened in order to ‘bring together the heads of international companies and the leaders of international organizations, so that business experience and expertise is channeled into the decision-making process for the global economy’ (according to ICC President Helmut Maucher, CEO Nestle).

The dialog between the ICC and the UN is an ongoing one, and includes regular meetings at the highest level. And while the ICC appears to have consolidated its hold on the UN’s activities in the economic realm, another global lobby coalition has long been an active partner in the UN’s work on environment and development. The World Business Council for Sustainable Development (WBCSD) , which describes itself as "the pre-eminent business voice on sustainable development" was the first corporate lobby group to force an institutionalized partnership with the UN. Unilever is one of the 150 multinationals taking part in the WBCSD. Practical cooperation between business and UN agencies like the UN Conference on Trade and Development (UNCTAD) and the UN Development Programme (UNDP) is also becoming routine.

Wanting to take advantage of the UN’s receptive stance towards the private sector, lobby groups such as the International Bioindustry Forum (IBF) increasingly target the UN. The IBF, an umbrella group of national and regional associations such as EuropaBio, BIO, BIOTECanada, and the Japan Bioindustry Association, is concerned by the growing culture of regulation resulting from widespread public concern and the backlash against biotechnology, particularly GM food products. By bringing the world's most powerful and influential biotech companies, such as Unilever, Monsanto, Nestlé, Novartis, Pfizer, and DuPont together, the IBF lobbies to prevent the adoption of potentially industry unfriendly agreements in the UN, and to transform the UN and its agencies into promoters of biotechnology.

Critics have recently hit the newly released Human Development Report (2001) of the United Nations Development Program (UNDP) for blind biotech bias, stressing the report presents as facts the unsubstantiated promises of the genetic engineering (GE) industry while dismissing the environmental risks and ignoring the real challenges of agriculture in developing countries. Various civil society organizations strongly disagree with the main messages contained in the UNDP Human Development Report 2001.

Brands Unilever is known for include Amora, Axe, Becel, Bertolli, Blue Band, Calvé, Cif, Close Up, Comfort, Country Crock, Domestos, Doriana, Dove, Flora, Heartbrand, Hellmann's, Knorr, Lifebuoy, Lipton, Lux, Omo, Pond's, Radiant, Rama, Rexona, Signal, Slim·Fast, Sunlight, Sunsilk, Surf, Vaseline and Wish-Bone.

History

Butter & Soap

Unilever was formed in 1930 when the Dutch margarine company Margarine Unie merged with British soapmaker Lever Brothers. Both companies were competing for the same raw materials (e.g. oilseeds), both were involved in large-scale marketing of household products and both used similar distribution channels. Between them, they had operations in over 40 countries. Margarine Unie grew through mergers with others margarine companies in the 1920s. Lever Brothers was founded in 1885 by William Hesketh Lever. Lever established soap factories around the world, and had plantations in many Third World countries. In 1917, Lever began to diversify into foods, acquiring fish, ice cream and canned foods businesses.

Control of the supply chain

In Unilever one activity has frequently led to another. The oil seeds crushed for use in margarine and soap yielded a by-product known as "cattle cake" which prompted a move into animal feeds. Processing the oil for use in margarine and soap yields other by-products, glycerine and fatty acids, which led Unilever into chemicals, a $2-billion business in 1986. In 1997 Unilever sold its specialty chemicals business to Imperial Chemical Industries (ICI) for US$8bn. Those millions of consumer products need to be packaged, which resulted in Unilever operating twenty-four packaging plants in six European countries. Consumer goods must also be transported, which turned Unilever into one of the largest truckers in Britain - and for fifty years, before it was sold in 1985, the Unilever-owned Palm Line was one of the biggest shipping companies out of West Africa.

Fishing is another area of interest. Unilever farms for salmon in Scotland, has prawn farms in several Asian countries, and is the major owner of a vertically integrated fishing business out of West Germany that includes catching the fish in deep-sea trawlers, processing the catch, and then selling the fish in company-owned shops and restaurants that carry the Nordsee name. Unilever made a public commitment to move towards buying all its fish from sustainable fisheries by 2005. To meet this objective Unilever and the World Wide Fund for Nature (WWF) jointly set up the Marine Stewardship Council (MSC) as a platform to promote sustainable fishing internationally (1996). The MSC is now said to be an "independent, non-profit body with a set of principles and criteria for sustainable fishing".

Acquisitions

Major acquisitions during the 80s included Brooke Bond in 1984, greatly strengthening the Unilever’s tea interests, while Chesebrough-Pond’s Inc, in 1987, brought a major additional stake in the US personal product market, as well as strengthening Unilever’s position in the world skin care market.

Again, in the 90s, there were numerous acquisitions, and Unilever began to put into effect its planned moves into Eastern Europe. However, the company largely withdrew itself from packaging and all agricultural operations, apart from Plant Breeding International Cambridge (R&D based company developing products in the agriculture and horticultural sector) mainly under license, sold to Monsanto in 1998 and the plantations. Much of the company’s agribusiness assets were sold as part of the company’s policy to focus on its core activities.

Strategy

In September 1999 Unilever announced its intention to focus on fewer, stronger brands to promote faster growth. The company is whittling its brands down to 400 (from 1,600) including familiar brands such as Dove, Lux, Lipton, Magnum and Calvin Klein fragrances. Consulting firm PricewaterhouseCoopers has been hired by Unilever to sell off ten of the firm’s 70 food brands.

The concentration on innovation and brand development on a focussed portfolio of 400 leading brands is part of Unilever’s latest growth strategy, called ‘The Path to Growth’, designed to accelerate top line growth and step up the rate of margin improvement in five years time. In February 2000 the company announced a series of linked initiatives (organizational changes, restructuring) to align the entire organization behind these growth ambitions.

The shake-up of its top management, splitting the company into two, separate global units –food and home, and personal care-- was one of these initiatives. And Unilever has started selling off any subsidiary businesses which are making less than average profits, and decentralising control of subsidiaries, with the corporate HQ in Europe just monitoring profit levels – and making sure they are maximized. This heavy focus on profit means cost-cutting - especially minimizing workers’ pay.

Another key component of the growth strategy is online sales. Unilever wants to step up the use of the Internet in order "to improve brand communication/marketing and on-line selling & to simplify business-to-business transactions throughout the supply chain". India’s Satyam Computer Services Ltd won an information technology services contract from Unilever. Unilever also made deals with Compaq, IBM, Microsoft, Excite@Home, Ariba Inc. (leader in all phases of business-to-business e-commerce) and WOWGO to enable a faster adoption of global e-commerce opportunities. In February 2000, Unilever and iVillage formed a new Internet company.

In its bid to concentrate on fewer, core brands, Unilever disposed of 27 businesses during 2000 for a consideration of approximately $642 million. The company sold, amongst others, the European Bakery Business, Benedicta a culinary business in France and various other small businesses and brands. The same year, Unilever acquired several high-profile companies, including American based Bestfoods, which strengthened Unilever’s market position remarkably. Other important acquisitions were Groupo Cressida Central America Foods (Home & Personal Care) Corporation JABONERIA NA (Ecuador, Foods, Home & Personal Care), Amora Maille (France, Culinary Products) Codepar/SPCD (Tunisia, Home & Personal Care), Ben & Jerry's (USA, Ice Cream), and SlimoFast (USA, Slimming Products). The total purchase consideration for businesses other than Bestfoods (total number: nineteen) was approximately $4,451 million. The acquisition of Bestfoods made Unilever's foods business the world's second largest after Nestle.

Unilever keeps selling businesses. In 2002, Unilever sold at least 19 of its food brands including cleaning firm DiverseyLever and cooking oil firm Mazola. Brands that are here to stay include Hellmann’s mayonnaise, Bird’s Eye, Persil, and Ben & Jerry’s ice cream. On these brands Unilever will focus its advertising efforts. The company has closed several big advertising deals on airtime with Carlton and Granada. Also, Unilever struck a massive deal with billboards company JCDecaux, the biggest poster contractor in Europe. The French firm will handle all Unilever’s poster advertising across 22 European countries for the next five years.

Outlook

Views on Unilever’s performance vary. On 28 August 2001, Credit Suisse First Boston (CSFB) downgraded Unilever from a "hold" to a "sell" rating, highlighting analysts’ and investors’ concerns about the performance of Unilever and the integration of Bestfoods. Unilever, on the other hand, is optimistic, saying it saw sales rise 35% by June (2001) and that estimated annual savings of US$32m will result form the acquisition.

Financial information
Major lines of business/segments: 
  • Home and Personal Care (HPC) Products include cosmetics, perfumes, personal wash, soap, toothpaste, deodorants, shampoo, fragrances, detergents for fabric cleaning, diagnostics (e.g. pregnancy tests)
  • Food Products include tea, ice-cream, fish, margarine, frozen foods, spreads & cooking products, salad dressings, culinary products, meat snacks, olive oil, cheese
  • Professional cleaning: DiverseyLever provides cleaning and hygiene products and services to industrial and institutional customers
  • Plantations, Plant Science and Trading Operations: Unilever operates tea plantations and develops raw materials for the vegetable, tomato, edible oil and bakery categories. The company also has oil milling operations.
Additional descriptive data
Link to full list of subsidiaries: 
Corporate Watch: Who, Where, How Much?
Sources
Watchdogs and related campaigns: 
Corporate Watch UK
McSpotlight
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