Unilever continues to restructure its operations, but to truly revive, it must focus on market shares
It has some of the world’s best managers and some of the most prolific brand portfolios. Yet, Unilever seems to be way past its prime, the days when the mere mention of its name commanded tremendous respect and admiration. Thanks to inability to cope with market trends, the company is desperately seeking a route back to good ol’ days.
Although 2007 has been a better year, there still remains a lot to achieve. While announcing results for the nine months ending September (turnover increased by 4% to €30.3 billion & net profit by 20% to €3.3 billion), CEO Patrick Cescau had enthusiastically commented, “Focus on our growth priorities, together with stronger innovation, improved speed to market & better in-market execution, is delivering consistent & sustainable organic growth.” 2007 results, to be announced as this magazine goes to print, are expected to be in line with company expectations of 3-5% organic growth.
Yet, as always, there are some devils in the details. As per Credit Suisse analyst Charlie Mills, a large part of the increase is due to rise in prices, i.e. value growth (around 2.5% in price growth estimated in Q4, 2007). The company underperforms peers like Reckitt Benckiser, Nestle & Cadbury in organic growth for 2007. Market shares are lower in 2007 compared to 2006 in most categories across Europe & US; deodorants being the only clear saving grace. Morgan Stanley analyst Michel Steib also maintains an underweight rating. He adds, “Unilever’s headwind from commodity costs will double from around 200 bps in 2007 to over 400 bps in 2008 estimate for the full year.”
The company had announced plans to do away with a whopping 20,000 jobs in August last year. Even emerging markets, long touted as a saving grace are facing the flak, evident from recent news of Hindustan Unilever Ltd. (HUL) doing away with 50 managerial positions. Comments K. Sudarshan, Managing Partner, EMA Partners India, “Earlier, HUL was insulated from the global parent and the company was designed for the high growth era.” He adds at the rates of growth prevalent at that time, they could carry non-performers.
Now the parent company is taking up more control, and redundancies are being created for jobs particularly in category innovation, manufacturing and even HR functions in India. The power brand strategy created further pressure. The bulge is mainly in the upper middle management, or 3A & 3B category. Also, it is no longer the top employer of choice in India’s key business schools.
With such tidings in one of Unilever’s key markets, it’s quite apparent that these are trying times for the company. More than restructuring and cost cutting, it’s important to get its brands back in the reckoning as far as market shares go. Perhaps that should be the most credible starting point to bring some vitality to this Anglo-Dutch behemoth.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
It has some of the world’s best managers and some of the most prolific brand portfolios. Yet, Unilever seems to be way past its prime, the days when the mere mention of its name commanded tremendous respect and admiration. Thanks to inability to cope with market trends, the company is desperately seeking a route back to good ol’ days.
Although 2007 has been a better year, there still remains a lot to achieve. While announcing results for the nine months ending September (turnover increased by 4% to €30.3 billion & net profit by 20% to €3.3 billion), CEO Patrick Cescau had enthusiastically commented, “Focus on our growth priorities, together with stronger innovation, improved speed to market & better in-market execution, is delivering consistent & sustainable organic growth.” 2007 results, to be announced as this magazine goes to print, are expected to be in line with company expectations of 3-5% organic growth.
Yet, as always, there are some devils in the details. As per Credit Suisse analyst Charlie Mills, a large part of the increase is due to rise in prices, i.e. value growth (around 2.5% in price growth estimated in Q4, 2007). The company underperforms peers like Reckitt Benckiser, Nestle & Cadbury in organic growth for 2007. Market shares are lower in 2007 compared to 2006 in most categories across Europe & US; deodorants being the only clear saving grace. Morgan Stanley analyst Michel Steib also maintains an underweight rating. He adds, “Unilever’s headwind from commodity costs will double from around 200 bps in 2007 to over 400 bps in 2008 estimate for the full year.”
The company had announced plans to do away with a whopping 20,000 jobs in August last year. Even emerging markets, long touted as a saving grace are facing the flak, evident from recent news of Hindustan Unilever Ltd. (HUL) doing away with 50 managerial positions. Comments K. Sudarshan, Managing Partner, EMA Partners India, “Earlier, HUL was insulated from the global parent and the company was designed for the high growth era.” He adds at the rates of growth prevalent at that time, they could carry non-performers.
Now the parent company is taking up more control, and redundancies are being created for jobs particularly in category innovation, manufacturing and even HR functions in India. The power brand strategy created further pressure. The bulge is mainly in the upper middle management, or 3A & 3B category. Also, it is no longer the top employer of choice in India’s key business schools.
With such tidings in one of Unilever’s key markets, it’s quite apparent that these are trying times for the company. More than restructuring and cost cutting, it’s important to get its brands back in the reckoning as far as market shares go. Perhaps that should be the most credible starting point to bring some vitality to this Anglo-Dutch behemoth.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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