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How Unilever Is Setting A New Standard For CPG


How Unilever Is Setting A New CPG Standard Fpr CPG

This may sound odd but I was delighted when Kraft Heinz’s proposed deal to buy Unilever fell through this week. I’ve never worked for Unilever, don’t know anyone who works there and don’t really have much passion for their products.

But what I do have, in increasing amounts, is an appreciation for the company and the way it does business. Specifically, I like very much how it handles brands and the egalitarian manner in which it manages its tax affairs.

On the brand front, Unilever has been playing second fiddle for as long as it has been in business. Despite proving a notable pioneer of marketing since its formation in 1929, Unilever has had the unfortunate challenge of squaring up with the American consumer goods giant Procter & Gamble for almost 90 years.

No one does branding better than P&G. The Cincinnati-based behemoth literally invented brand management back in the 1930s and has been ahead ever since. But with dark rumors swirling that P&G might not survive 2017 in its current state thanks to shareholder impatience and the growing attention of a certain Mr Nelson Peltz, this could finally be Unilever’s time.

The other reason to feel bullish about Unilever’s branding capability is that it appears to have a core competence that most of its big, billion-dollar rivals lack. Starting with the acquisition of Ben & Jerry’s back in 2001, Unilever has proven a master of acquiring kooky, high-potential brands and then (and this is the tough part) not screwing them up.

More recent notable purchases like Australian tea retailer T2 and economy razor company Dollar Shave Club both appear to be highly prized acquisitions but also ones that a giant, bureaucratic consumer goods company could easily destroy. The fact that they now belong to Unilever suggests they will not only survive acquisition but become more successful because of it.

The way that Unilever sent in its executives to work with Ben & Jerry’s and restructure its systems, while retaining the essential elements of the brand and its operational culture, continues to be studied at almost every top business school as best practice. To be able to pick, acquire, integrate, grow and then sustain smaller, independent businesses is a core competence that almost every consumer packaged goods company, from Coca-Cola to Mondelez, now prizes above all others. And Unilever appears to have the magic formula.

Broken Promises

In contrast, consider Cadbury, which was acquired by Kraft in 2010 (before its merger with Heinz and before its confectionary business, along with Cadbury, was spun off as Mondelez). There are many who believe the Cadbury brand was significantly weakened after Kraft took control. Broken promises about manufacturing plants, changes in product formulation and bizarre attempts to co-brand Cadbury products with its new parent company’s offerings (Cadbury chocolate with Philadelphia cheese anyone? Ritz crackers in your Dairy Milk bar?) have combined to leave Cadbury weaker than it once was.

And it isn’t just branding in which Unilever excels. Despite the deluge of fluff that corporate social responsibility programs and brand missions have become in recent years, there is significant evidence that Unilever really does represent the acceptable face of responsible corporate capitalism. CEO Paul Polman is often caught sounding far more like a liberal Dutch politician than the boss of one of the biggest businesses on the planet and Unilever remains one of the most admired businesses for the way it handles its corporate affairs.

In particular, the company has an explicit policy on tax avoidance that sees it pay significantly more than most of its peers. That’s not saying much given the dreadful state of corporate tax affairs at most of the world’s largest companies but Unilever remains, if not perfect, the precept for how a big multinational company can manage fiduciary responsibilities without being tax dodgers.

I still recall the tension I felt when the ‘Lux Leaks’ revealed a veritable ‘Who’s Who’ of corporations that had funneled billions of revenues through Luxembourg to achieve an effective tax rate of just 1% on their sales. Almost every major company, each with their bright shiny brand purpose and CSR statements, was present. From Apple to VW, the list of allegedly implicated companies was in the hundreds. I remember the dread of first thinking, ‘Oh God I’ll bet Unilever is on the list’, and then the relief in seeing it absent under the U column.

Again, we could contrast what happened at Cadbury since its takeover by Kraft. You’d have to look a long way to find a family that gave more back to their community than the former and current heirs to the Cadbury family name. But the company, after its acquisition, has pursued a very different path. In 2015 Cadbury generated just under $62M in profits from its UK business and managed to pay not a penny in corporation tax. Where can I sign up for a similar arrangement?

In truth these two distinctive competencies of Unilever – a more mature, progressive approach to corporate responsibility and an ability to acquire and then run smaller brands superbly – are very much connected. The era of brands emerging from products built in laboratories with unique selling propositions that a company can then promote to the market using scale advantages and mass marketing is coming to a close. We are entering interesting new territory in CPG in which small, cool startup brands with a back-story, distinctive founder and a proper brand mission are now seriously threatening the global behemoths of the 20th century.

Unilever’s ability to be the relative good guy when it comes to corporate activity, combined with its notable track record of understanding and respecting the nascent values of the brands it has acquired, will create a formidable advantage in the very different era for CPG that awaits. It’s something the likes of Coca-Cola, which now faces the decline of its cash cow Coke and the immediate need to acquire well and acquire quickly would love to be able do as well as Unilever. It may even be one of the driving reasons for the approach from Kraft Heinz because that company, as efficient as it is, will surely struggle to acquire these meaningful big brands of the 21st century with the reputation it currently holds.

In the era of ‘ROI marketing’ it’s very easy to see everything purely as a matter of profit. Perhaps from that point of view the Unilever acquisition really made sense to Kraft Heinz. But I’m delighted the deal has fallen through and the company gets to continue its operations. It’s a great manager of brands and an honorable company to boot. This no-deal is a true win for responsible business.

This thought piece is featured courtesy of Marketing Week, the United Kingdom’s leading marketing publication.

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1 Comment

Ruby Denton on March 02nd, 2017 said

What a wonderful breath of fresh air in this stale world we have today. It is uplifting to know that there are still companies that are doing the right thing and hearing that they are being recognized and rewarded for it.

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