Unilever – Arrival of the Long-Awaited Corporate Turnaround

Consumer Staple Company Going Through an Inflection Point

Source: ResearchGate

Introduction

This company is one of the most recognisable brands in the world with its strong brand offering and portfolio, it is a company which produces, manufactures, and distributes products which the global population consumes daily. One of its segments includes shampoos like Dove and Sunsilk and moisturisers like Vaseline. Another segment includes brands like Rexona, and Axe which are leaders in the deodorant category. It also has a Home Care segment which includes cleaning products like OMO, Comfort and cleaning detergents like Ariel which is very popular in emerging markets. Knorr and Hellman’s are part of the food and nutrition segment while the Ice Cream segment includes long time favourites such as Walls, Ben & Jerries, and Cornetto. That company is Unilever (LON: ULVR) which we believe is going through a turnaround.

Hein Schumacher replaced Alan Jope in June 2023 after carrying out a successful turnaround of FrieslandCampina in Netherlands. He represents a shift in the company’s strategy of focusing on volume growth instead of price hikes. Additionally, the company is undergoing changes designed to improve bottom-line performance after overgrowing its SKU count under Alan Jope’s leadership. We are hopeful that Unilever will invest in innovation and its various brands to improve its financial performance in the long run after choosing to focus on the short term under the previous management.

Growth Action Plan

The new management team uses the ‘Growth Action Plan’ frequently during it earnings call. The plan has 3 parts:

·       Faster Growth

·       Productivity & Simplicity

·       Performance Culture

Faster Growth

Previously, Unilever focused on growing all of its brands which meant stronger brands were devoid of the attention they needed. A lot of key brands like Rexona and Axe lost their superiority in the deodorant category while customer downtrading in emerging markets affected home care brands like Ariel and Surf. By refocusing on its 30 ‘power’ brands they are attempting to rebuild superiority in categories which have significant growth potential through premiumisation in both developed and emerging markets and volume growth in countries with growing populations.

To understand this further, we will explore how the plan has affected Dove. Dove’s brand value is greater than €4 billion but struggled previously due to a lack of innovation. In the past year 2 different programmes have been launched: Advanced Care for Women and Dove Men+Care. The New Advanced Care range was developed after identifying that the number one skin problem UK consumers face is dry skin. ‘Enhanced Moisturisation Seekers’ look for ways to care for their skin and are willing to upgrade to products that offer long lasting effective moisturisation. This helps consumers trade up for superior moisture performance. Similarly, Dove’s new Advanced Care Body Wash uses Dove’s new MicroMoisture technology which provides consumers with 24 hour soft skin by working to renew the skin’s moisture from within. This body wash range is available in 10 variants which differ in fragrance. These new additions are available across grocery, health & beauty retailers, and convenience channels but are not available in discounters and wholesale stores where only Dove Classic Care is sold.

Similarly, Hellman’s has enjoyed a bit of a resurgence due to the rising popularity of flavoured mayo. Customers are shifting from mustard, mayo, and ketchup with 35% of users willing to buy and try. Flavoured mayos are not replacing traditional mayos and are being bought as additional toppings by customers. By playing with flavours, Hellman’s is able to tap into local tastes while remaining relevant to younger audiences. For example, Truffle sells well in Europe while Chilli Lime does well in the U.S. Additionally, squeeze bottle packaging is being used with the flavoured mayo to appeal to customers who are conscious about sustainability and waste. It also allows flexibility in the application of the mayo with it being used in sandwiches, burgers, meats, and other foods.

Dove and Hellman’s show how Unilever is optimising its power brands for growth By introducing higher quality products and extending the range of key products like moisturisers and lotion, it is attaching a premium label to its brand which will deliver pricing and volume growth as it taps into a wider customer base including customers looking for cheap options. Hellman’s using its brand strength to introduce new flavours can translate its core mayo offering in new geographies while catering to medium term trends. This brings in customers from new markets while also attracting those trying to match trends including restaurants and retailers who are large purchasers of condiments. Similar growth strategies which capture customers in different ways can help the company deliver the desired volume growth.