Case Study UnileverEssay title: Case Study UnileverThis case study chronicles Unilever efforts at restructuring, divesting, acquisition, and general streamlining of its worldwide operations. These operations, in 2000, encompassed 1,600 brands in 88 countries. These products are mostly food, personal care, and household products. Around that same year, Co-chairmen Niall FitzGerald and Antony Burgmans decided that Unilever needed to make some rather drastic changes in order to remain competitive. More importantly that competitiveness was the importance that the company maintained ever increasing profitability. The co-chairs planned to bring about this much needed change via institution of an ambitious 5 year plan. This plan was dubbed the “path to growth” strategy.
This 5 year plan would have many focuses aimed at making Unilever more profitable. The key strategies to be implemented were:Reduce portfolio from 1600 to 400 core brands by 2004. This would allow the concentration of assets in marketing, production and distribution to be concentrated. This would also eliminate underperforming brands.
Increase sales growth to around 5-6% on top performing brands,Increase overall margins to over 16%.This initiative wasn’t expected to be cheap. It was projected to cost roughly 5 billion Euros and 25,000 employees. It was hoped that in the end it would more than pay for itself with better strategic stance, more efficient distribution, consolidated production, and generally increased overall efficiency.
Unilever began the first 12 months of its restructuring with new acquisitions. It acquired industry leaders in their market segments. These companies included: Slimfast diet foods, Ben & Jerry’s ice cream, and the conglomerate Bestfoods. Bestfoods alone had 1999 sales of over $8 billion. The Bestfoods acquisition was pivotal to the long term future success of Unilever. Successful integration of their operations was not an option, it was a necessity. Along with these new acquisitions, they chose to divest in the following brands: Elizabeth Arden cosmetics, several fragrance lines, much of its baking brands, and its European dry soups and sauces business. The latter sale was forced to ease the EU’s fears of a monopoly by its acquisition of Bestfoods, who held the majority of sales in that category.
It was widely felt by management at Unilever that these restructuring efforts would serve as cornerstones on their new initiative. In my opinion they were indeed on the right track by cutting off all of the �dead weight’ of underperforming/problem brands. This would allow them to focus efforts on those designated core brands that could be pushed to be sales leaders in their respective markets. I think that pre-2000 Unilever fell victim to the old maxim “Jack of all trades and master of none” Their new initiative showed great promise in redressing this issue and putting the forward momentum upon it that it would need to remain competitive in the 21st century.
Around the third quarter of 2003 Unilevers management used several criteria (as presented in the text case study) to buttress their message that the plan was thus-far successful and on track:
Leading brands, including new acquisitions accounting for 92% of their total revenues, up from 75% in 1999. Sales in this group had risen to 5.4.Divesture of 110 brands, with sales revenues of over 6 billion euros.Savings thus-far of over 3 billion euros.Net debt reduced from 26.5 billion at the end of 2000 to 16 billion euros as of third quarter of 2003All of these fact and figures point to the successful goal keeping thus far of the path to growth strategy. All of the goals originally reached for had thus far been achieved. When I examine the numbers, a key question comes to mind with regards to overall Unilever sales growth rates amongst their leading brands. From 2002 to 2003 the overall sales average amongst leading brands fell from 5.4% to 3.1. I think this is a significant drop, and it may possibly be
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6. Non-FGA: The “Non-FGA” portion of revenues that accounted for 15% of those that reported, for the most part, for growth (e.g., for a quarter) increased from 1.8% to 2.0% during 2002 to 2003.The main trend that I see when I look at this data is that when you look at the Non-FGA portion of the revenue that accounted for 15% of the total revenues for non-profit entities, there is an increase in growth rates. That growth rate was greater in 2002, when there were only a 5% increase in sales growth rate. In 2003 I see growth rates where the non-profit component was at least 10%, and the growth rate of sales in non-profit organizations was not at the same level either.What we have seen in this year’s data is growth rate of non-profit organizations has been a more or less stable rate for non-fiscal years as their non-profits experienced, as I have explained earlier, some signs of some of the challenges that had to be overcome by non-fiscal fiscal years. First off, some of the more notable examples of non-fiscal years are when businesses were expected to use this growth momentum more strongly to generate revenue. These are generally the cases where the profit margin was over 10 percentage points before earnings and, as we saw in the second graph, where the value of the non-fiscal revenues was at least twice that or more. The bottom line is that the Non-FGA growth was a lot bigger in the financial year that ended in 2004 as non-fiscal entities used this growth momentum to generate revenues more strongly. The same goes for non-fiscal periods when the growth rate of sales was lower and the Non-FGA were able to gain more revenue.So my focus here is on what we have seen and what is happening here that is the most important attribute that we can focus on to identify the cause for the higher or lower growth rate growth for non-fiscal organizations. What that does not do is explain all this growth pattern like it might reveal a certain kind of problem or make an economic change in one industry or the other. Let’s start with how this is manifesting in the last five years.The first question is how much of this growth was expected to be generated internally. In 2001 it was less than 3%.In 2003 it was around 2% or less. In the last year or two of the decade it has gone to much more than 10%. We are dealing with a situation that has been going on to this moment. What I hear from other analysts and analysts who have done more than their teachers and business owners who have been making billions of dollars during the last five years and are now wondering what their next destination will be will turn out to be a much more complex scenario. A lot of new analysts will get excited about this because it clearly has never been this simple. They know that it is going to be a lot different. What does this mean for future growth? I think it shows that what they want to do in their businesses