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consumer products
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last edited
by PBworks 15 years, 9 months ago
Consumer Products
In Emerging Markets
When looking for growth in consumer markets, companies look to emerging marktets. As consumers in countries such as Brazil, India, China become wealthier, the prospects of selling more and more consumer products increases. Therefore, companies such as P&G and Unilever are in hot competition in these markets. These markets are growing so rapidly that within just two years they will account for half of all the world's consumer spending, estimates Harish Manwani, head of the Asian and African businesses of Unilever, a giant of the world's consumer-goods industries.
Key companies to watch
P&G
P&G, based in the US, recently acquired Gillette (for $54 billion USD)...increasig P&G's international brands (a direct challenge to Unilever)
Procter & Gamble Company - Procter & Gamble (NYSE:PG) is the world's leading company in the household and personal products (HPP) industry. P&G's product line boasts over 23 brands... read more
International focus on emerging markets: Proctor & Gamble sells more than $40bn worth of products, from Pampers nappies to Pantene shampoo – beyond US borders every year
Unilever
The worlds second largest consumer goods company. It is an Anglo-Dutch multinational with two boards and two stockmarket quotations.
Strength in emerging markets
Unilever has more than a century of experience in some of these countries, Unilever tripped up.
Few companies have had the head start in places like Africa, China, India and Latin America that Unilever enjoyed. Yet despite the Anglo-Dutch giant's formidable range of products and unprecedented depth of local knowledge, when rivals began to push harder its empire came under threat. Unilever was forced to re-examine its legacy and to act on what it found. Now the results are coming through.
44% of the company's sales now come from emerging economies
Unilever needed to change urgently.
That would involve removing unnecessary complexity and bureaucracy, much of it accumulated over decades of operating in almost every country in the world. But change had to begin at the top. Listed on both the London and Amsterdam stock exchanges, Unilever used to be run almost by committee, with two joint chairmen, one appointed from Britain and the other from the Netherlands. In February 2005 its management structure was altered: Patrick Cescau, the joint chairman from the British side, became the sole chief executive.
Multi-domestic strategy for international expansion (history of Unilever)
Unilever was born in 1930 in one of the largest mergers of its time, between Margarine Unie, a Dutch producer of margarine, and Lever Brothers, a British soapmaker. There was industrial logic in this because both businesses shared a common ingredient, palm oil: growing it in overseas plantations and importing it would benefit from economies of scale. Yet the histories of both firms stretch back into the 19th century, to when they dispatched young men on ships from Liverpool and Rotterdam to faraway places. The young men were under instruction to build businesses. They set up plantations, built factories and established distribution and supply systems. With long lines of communication, these ventures invariably developed as and how they could, often with great independence.
Multi-domestic strategy as a strength and a weakness
The reason was that Unilever's great strength—its strong roots in local markets—had turned into its biggest weakness. In an age of globalisation, Unilever's local bosses had become kings who took important strategic decisions autonomously. There was duplication and even triplication of corporate structures, creating unnecessary complications. All this weighed heavily on the company, so that it was not able to exploit its size and geographical reach as well as it should have done.
This had to be changed, but not by destroying the need to fine-tune products for local markets. This is a necessity for any multinational selling to the consumer. Even McDonald's and Starbucks, which appear to sell the same stuff everywhere, in fact vary their offerings from place to place. In many instances, Unilever's attention to detail has worked well. For instance, Indian women often oil their hair before washing it, so Western shampoos that do not remove the oil have not sold well. Unilever reformulated its shampoo for India and ditched the conditioner.
But Unilever sometimes went too far. It used different formulations for shampoo in Hong Kong and mainland China, even though the hair and washing habits of most people in both markets are almost identical. Unilever would also sometimes vary the packaging and marketing in similar markets of even its most commoditised products, such as deodorants. “We tended to exaggerate complexity,” says Simon Clift, the chief marketing officer.
This complexity continued at the operating level. In China, says Mr Cescau, Unilever had three companies. Each had its own chairman, who in turn reported to two regional presidents, who answered to two members of the executive committee. Today one person is in charge of China across all divisions. There were similar examples throughout the company, with hundreds of different policies for things like company cars and human resources.
Making Unilever more united, slimmer and more efficient has been painful. The company now has 179,000 staff, down from 223,000 in 2004. There is still some way to go. By 2010 it aims to close some 50 of its 300 factories and reduce its regional centres from 100 to 25.
Hindustan Unilever is one of the jewels in the company's emerging-market operations. It is India's biggest consumer-goods company and biggest advertiser.
Unilever of today: a diverse company
The modern Unilever that eventually emerged carried with it strands of its ad hoc evolution. It is unique among big consumer-products companies in that it makes and sells food, household goods and personal-care products. Its rivals tend to do just one or two of these things: for instance, Switzerland's Nestlé, the world's biggest food firm, does not sell household goods or personal products. And P&G does not sell food, but sales of more than $75 billion put Unilever firmly into second place in the consumer-goods league table. There is also a difference in style: “P&G is simply sharper and more aggressive than Unilever,” says Charles Mills, a consumer-goods analyst at Credit Suisse, an investment bank. Unilever has also fewer “power” brands with annual sales of more than $1 billion than P&G does.
Key Brands
Among its biggest brands are Knorr (soup), Hellmann's (mayonnaise), Lipton (tea), Rexona and Axe (deodorants), Omo (laundry detergent) and Sunsilk (shampoo). Unilever is the biggest maker of deodorants in the world, with brands including Rexona, Shields, Dove, Lynx, Axe and Sure. But only about half the world uses deodorants. Three decades ago deodorants were almost impossible to find in Brazilian shops, but Unilever's sales there are now worth €400m a year. The home and personal-care division of Unilever accounts for 45% of the group's sales and does about two-thirds of its business in emerging economies.
Global trends and the effect on Unilever
Recession in America (or something near to it) will have knock-on effects in the rest of the world. But prices for food commodities and energy will remain stubbornly high. And the dollar is unlikely to appreciate in the near future. Like most of its rivals, Unilever will have to increase its prices for food as well as household and personal-care products. This could hit sales, especially in emerging economies.
Global competition between Unilever, P&G, and others
Defending its strong position can cut into Unilever's profit margins, says Mr Mills, the analyst at Credit Suisse. When P&G decided on a big push into India in 2003-04, margins at Hindustan Unilever, Unilever's Indian subsidiary, fell from just over 20% to a little more than 13%. But it kept its big rival at bay. In the Indian market for laundry products, for instance, Unilever even managed to increase its share slightly, to just over 37%. Ralph Kugler, boss of Unilever's home and personal-care division, is confident that the company can continue to face up to its competitors' advances. “We are much better organised now to defend ourselves,” he adds.
read more: from the Economist
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