Summary of Key Points
Under the leadership of new CEO Fernando, Unilever is undergoing a transformation that emphasizes "getting rid of the unnecessary and adding new growth": shifting from relying on price hikes to maintain profits to focusing on increasing sales volumes. The company is revitalizing its brands through unconventional marketing approaches that blend with consumer culture (such as the grassroots football initiatives during the World Cup). It has also divested itself from its slow-growing food business (by splitting off its ice cream division and merging it with Gillette), focusing on high-growth segments such as home care, personal care, and beauty and wellness products. Unilever has repositioned its market focus, with the United States and India becoming core pillars of growth, while China is now treated as a market for "selective expansion." Additionally, the company has acquired younger, niche brands (such as natural personal care products and nutritional gummies) to strengthen its offerings and make itself more modern, premium, and consumer-centric.
1. From "Price Hikes to Sales Focus": The New CEO's Strategy
In recent years, like many consumer goods companies, Unilever has relied on price increases to combat inflation. However, this strategy led to reduced consumer purchasing power and weaker growth. Since Fernando took over, sales volume has been prioritized as the key driver of success:
- Price Adjustment: Approximately 50%-60% of products had prices that were not in a reasonable range; now, these prices have been adjusted to be more competitive (for example, reducing the price of laundry detergents in Brazil and India), encouraging consumers to buy more.
- Marketing Transformation: Unilever has shifted from traditional television advertising to a more interactive approach, involving consumers, bloggers, and barbers to promote its brands. For instance, Dove allowed Reddit users to test its hair masks and published all 50 comments (positive and negative) directly, resulting in 1 billion impressions.
- Increased Marketing Investment: The company has increased its marketing spending from 13.1% of revenue to 16.1%, with a significant focus on the personal care segment (nearly 18%). It has also implemented a "creators strategy" aimed at ensuring that there is at least one influencer representing the brand in every postal code in India and every town in Brazil.
The results are evident: sales volume increased by 5.5% in the second quarter, the best performance since 2010, and the stock price rose by 8% in a single day, signaling that investors have seen real growth.
2. Selling off the Food Business: Not Because It's Unprofitable, but Because It's Growing Too Slowly
Unilever used to have both soap and food as its main businesses, but it is now shedding the food division:
- The Problem: Although the food business had a decent profit margin of 23.3%, growth was stagnant (only a 0.2% increase in sales volume in the second quarter). For example, Hellmann's mayonnaise lost market share due to the delayed launch of an avocado oil formula.
- Why the Merger with Gillette: Fernando views this as a strategic move to drive growth. Unilever can focus on its core personal care business, while Nestlé and Hellmann's will have access to better distribution channels and research and development resources.
- Investor Reaction: Initially, there were concerns about the complexity of the transaction, but the stock price rose in July, indicating that the market is temporarily supportive. However, the ultimate success of the merger remains to be seen.
3. World Cup Marketing: More Than Just Advertising
During the World Cup, Unilever took a unique approach:
- Innovative Grassroots Football: The company organized matches with eight community teams in Brazil and filmed five episodes at Arsenal's home stadium. The videos focused on the idea that dirty clothes are a result of living a meaningful life, rather than simply highlighting the cleanliness of its products. This strategy led to 130 million views and double-digit growth in Unilever's fabric cleaning business in Brazil.
- Brand Collaboration: A total of 35 brands participated, covering over 120 markets, with 50,000 creators producing content. Limited-edition products were released, and creator centers were established in Mexico City and New York to integrate the brand with social media and retail promotions.
- Long-Term Purpose: Fernando views the World Cup as a test of whether Unilever can use these methods to create consumer desire and truly connect with its audience, rather than just making short-term profits during the event.
4. Major Shift in Market Focus: India as a New Priority, China as a Growth Opportunity
Unilever previously balanced its efforts among the US, India, and China, but it has now adjusted its strategy:
- India as the Next Big Player: Sales volume increased by 10% in the second quarter, with record shares in home care and hair care products. Fernando declared that "India's decade has begun."
- China as a Market for Selective Expansion: Due to slowing consumption and changes in shopping platforms like TikTok and Pinduoduo, traditional marketing methods are no longer effective. Unilever is focusing on a few brands (such as Dove and Vaseline) and pursuing a more premium and digital approach in China (mid-single-digit growth in the first half of the year).
- The United States as a Stable Anchor: The acquisition of Grüns (a nutritional gum brand) aims to strengthen Unilever's presence in the US market, particularly in high-end and digital channels.
In short, resources are being directed towards areas with faster growth potential.
5. Acquiring Young Brands to Fill Gaps
While phasing out old businesses, Unilever is acquiring smaller, niche brands that complement its offerings:
- Target Brands: Natural personal care brand Wild in the UK, male care brand Dr.Squatch in the US, skincare brand Minimalist in India, and nutritional gum brand Grüns in the US. These brands cover areas where Unilever lacks presence, such as high-end markets and digital channels.
- Acquisition Method: Instead of large-scale acquisitions (like trying to buy GlaxoSmithKline's consumer business), Unilever is focusing on smaller brands that can be integrated into its existing portfolio and distributed globally using its existing channels.
- Funding: The cash from the divested food business is being used for acquisitions and share repurchases (6 billion euros), benefiting shareholders as well.
Conclusion
Unilever's transformation is not about starting from scratch but about accelerating adjustments to become a company that focuses more on personal care, appeals to younger consumers, and better understands their needs. The mud from the Brazilian community football matches may have dirtied the players' clothes, but it also symbolizes Unilever's new beginning. Whether this transformation will be successful depends on whether sales can continue to grow after the World Cup hype subsides and whether the new businesses can sustain growth. For now, however, the company has taken a crucial step forward.