Sales: $33.5 billion
Key Personnel: Paul Polman, chief executive officer; Graeme Pitkethly, chief financial officer; David Blanchard, chief research and development officer; Marc Engel, chief supply chain officer; Alan Jope, president, personal care; Kees Kruythoff, president, North America; Leena Nair, chief human resources officer; Nitin Paranjpe, president, home care; Keith Weed, chief marketing and communications officer; Jan Zijderveld, president, Europe.
Major Products: Personal Care—Axe/Lynx, Dove, Lifebuoy, Pond’s, Rexona, Signal, Close-Up, Sunsilk, Lux, Vaseline, Tigi. Household Care—Persil/Omo, Cif, Comfort, Domestos, Sunlight, Radiant, Surf, Snuggle.
New Products: Dove Advanced hair series; Acquisitions—Dermalogica, Murad, Kate Sommerville, Ren, Camay and Zest.
Comments: When it comes to the consumer products industry, nobody wants to be stuck in the middle. More often these days, successful companies play in the prestige or value sectors or sometimes both, but under no circumstances does an executive want to find herself caught between a rock and a hard place.
During the past year, Unilever was clearly focused on the top shelf, purchasing four premium skin businesses with annual sales of more than $400 million. These brands include Ren, Kate Somerville, Dermalogica and Murad. The acquisitions didn’t do much to move the sales needle in 2015, but Unilever expects all of them to be a contributor going forward as more consumers seek affordable luxuries.
Corporate sales rose 4.1% (up 10% when currency impact is factored into the mix). Personal care sales increased 13.2%, of which 7.6% was currency impact. Operating margin rose from 18.7 to 18.9%. The company credited improvement to the launch of dry spray deodorants in North America, the launch of Lux Luminique in Japan and the rollout of Dove Advanced Hair Series.
Home care sales rose nearly 11%, including a 4.5% favorable currency impact, with more than 80% of sales derived from emerging markets. Operating margin improved from 6.3 to 7.6%. During the year, Unilever relaunched Sunlight with better stain removal and improved Omo, too. Also providing a lift was the launch of Comfort Intense fabric softener and the introduction of Cif to new markets.
Good stuff, but that doesn’t mean Unilever isn’t watching costs. In January, the company unveiled a zero-based budgeting program to squeeze more efficiency out of marketing.
The concept requires managers to start from scratch to justify marketing and other outlays. Unilever piloted zero-based budgeting in Thailand last year and reduced overall spending across all areas by 2 percentage points as a share of sales. In another cost-cutting move, Unilever will use new “functional models” to reduce costs for internal marketing and other staffing, better aligning headcount costs with where the company generates revenue.
As part of the Unilever Sustainable Living Plan, the company became the first to publish a detailed, stand-alone Human Rights report under the framework set down by the UN Guiding Principles on Business and Human Rights.
For the first quarter of 2016, sales fell 2% to €12.5 billion, but Unilever was quick to point out that underlying sales growth was 4.7%, driven by an 8.3% gain in emerging markets. Volume improved 2.6%.
In a note to investors, chairman Paul Polman said Unilever will continue to focus on driving agility and resilience in its business through the key programs which were established in 2015; i.e., net revenue management, zero-based budgeting and the next stage in its continued organizational transformation.
As this issue went to press, Unilever announced its intent to acquire Dollar Shave Club, an online purveyor of razors and men’s grooming items that shook up the razor category and even caused Unilever’s biggest competitor, P&G, to roll out its direct-to-consumer sales model for Gillette.