Unilever Case Analysis

Its origin goes back to the 19th century when a group of companies operating independently, produced soaps and margarine. In 1930, the companies merged to form Unilever that diversified into food products in 1940s. Through the next five decades, it emerged as a major fast-moving consumer goods (FMCG) multinational operating in several businesses. In 2004, the Unilever 2010 strategic plan was put into action with the mission to ‘bring vitality to life’ and ‘to meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life’. The corporate strategy is of focusing on core businesses of food, home care and personal care. Unilever operates in more than 100 countries, has a turnover of €39.6 billion and net profit of €3.685 billion in 2006 and derives 41 per cent of its income from the developing and emerging economies around the world. It has 179,000 employees and is a culturally-diverse organization with its top management coming from 24 nations. Internationalization is based on the principle of local roots with global scale aimed at becoming a ‘multi-local

Unilever will want to regenerate their product so that they will be able to be the market leaders for the product again, this is going to be essential for some products where they rely on the business being a good market leader for most of their products. The shareholders will want to know about the business as they will want to have the business sot be the market leader for the company and they will also want to have the product regenerated as quick so that sales are not hit too effectively. They will also want the product to review and test why it has become a decline in sales to make sure that they are going to stop it from happening to other

The threat of substitutes in the food retail industry can be high among the ‘Big Four’ as switching costs are relatively low and products can be similar. However, most have their own private labels and also target slightly different markets, such as Sainsbury’s having more upmarket positioning and Tesco’s cost leadership. Waitrose offers unique and differentiated products, which are, in the eyes of the consumer, significantly superior. No other supermarket offers such premium quality products with great service and such a large range of organic products as Waitrose, so this makes them extremely difficult to substitute. (Euromonitor, 2008).

Being a grocery store, there are no high involvement products, meaning there are no products which have high price tags like that of a house or vehicle, and comes with no risk or buyers’ remorse, unless they try a new product and they do not like it (citation). Throughout the store are various low-involvement products such as shampoo, pasta sauce, and eggs. All these products are displayed the same, with similar items grouped together, and items in the same category in the same isle. Products that are on promotion, and that are currently being offered at exceptionally low prices, are placed on the end cap of each of the nonperishable item aisles.

Unilever Sri Lanka is multi-national company which providing 400 brands spanning 14 categories of home. The company product portfolio includes different worldly recognized brands such as Lipton, Knorr, Dove and Omo. Moreover, Unilever spend €1 billion every year for research and development and owning five laboratories around the world in order to encourage and explore mew things. Further, Unilever consider the customer research as vital part of the organization as it gives the feedback of customers about their current and new products. In present 174000 people work under the Unilever as employees and support thousands of distributors, contractors, and suppliers for their career. Thus, companys’ oral brands such as Mentadent, Peposodent and

By not needing to maintain a high profit margin on the fooditems, this has allowed the supercenters to keep their food prices down in comparison with mosttraditional supermarkets.The recession, which started in 2008, has helped drive the need for private-label products,or as they are more commonly called, store brand products. These private-label productsgenerally cost the consumers about twenty-five percent less than the major national brands thatare offered. Throughout the supermarkets and other types of food retailers, the private-labelsales grew by more than 9% from 2008 to 2009, and these types of private-label sales accountedfor about 35% of Kroger’s overall sales. Most stores do not operate their own processing plantsfor these private-label items; Kroger does however operate their own plants for the private-labelproducts.

Operation of Unilever around the world starts fragmenting, but Unilever continues to expand globally and investment made in R&D is increased.

Kroger and Safeway belong to the supermarket industry. In the supermarket industry, the business environment is quite competitive. Besides the traditional grocers, there are now many different types of retailers all fighting to obtain a share of the food wallet. Customers have a huge selection of where to buy their groceries. Not only do the customers have the choice to pick supermarkets around the neighborhood, they also have the option to shop at alternative retailers, such as national discount chains and warehouse stores. From an operating perspective, supermarkets are a homogenous group, meaning similar to each other. Factors that contribute to the differences among the supermarket are geography and store formats. The supermarket industry is faced with the challenges of maintaining market share and profits while attempting new strategies and store formats in an effort of trying to make the store stand out from the other retailers. Major demographic and consumer lifestyle changes have affected not only how consumers shop but also where they shop. Traditional supermarkets have been in a decline since shoppers now spend less and how frequently they shop in a particular store. While some supermarket operators continue to attempt to cut costs so they can offer reduced everyday prices, they find this to be a tough approach when competing with low cost operators like Wal-Mart and Costco.

ALDI offers goods at low prices with limited substitutions within their stores. Carrying less than 1,500 products total, the stores offer discounted generic brands for their customers. By doing this, this keeps the prices low and also brings increases the overall profitability for the ALDI company. However, ALDI doesn’t have much of a control over the price of substitutions for packaging. This means that the packaging companies set the price for the materials used to package goods for ALDI’s stores. Large grocery stores products serve as competitive substitutions for ALDI. Customers who prefer the taste of well-known brands’ products over generic products may factor that in when deciding where to shop. A customer may be hesitant to try a generic brand at a lower price if they have a particular taste for the branded substitutions. Products can also serve as substitutions when price is a factor. ALDI’s products are at discounted prices and customers who want to spend less on products will take the lower priced product over its more expensive substitution. This works as an advantage for the

This report aims to analyse the financial position of Unilever PLC within its daily operating activities and it also compares the company’s performance with its key competitor, the Proctor and Gamble Company (P&G). The report also includes background of both the companies and an industry overview. To better understand the performance of both the companies, the segmental analyses have been done for both region and products. Due to the global crisis, Unilever and P&G both are facing price rise and inflation pressures, also instability in the Eurozone. All these factors are strongly impacting their operation activity and long-term growth decision plan. Finally After a careful examination of the financial ratios of both the companies, we recommend Unilever as a good company to invest as compared to P&G .The reasons for the following can be seen in the report below.

Unilever currently has three manufacturing plants in South Africa, located in Durban, Pietermaritzburg and Johannesburg. The factories manufacture a range of personal care and food products, such as ice cream, tea, and margarine spread. The country’s logistic infrastructure and ports are very well developed; in fact, 98% of its imports come in through port terminals. The roads in

In 2000, Unilever decided to reduce 1,600 brands down to 400 and then select a small number of them to serve as “Masterbrands”. One of the reasons to have fewer brands is to decrease control issues. It is harder to manage so many brands, especially when each one has its own particularities. As Deighton pointed, Unilever’s brand portfolio had grown in a relatively laissez-faire manner. In other words, the company’s brands were created without large interference.

Despite the inconsistent changes in spending from year to year, P&G’s market share consistently increased between 1% and 2% every twelve months (see Figure 1). The question is, with Unilever’s actions in regards to marketing expenditures, is the 15% increase going to be enough to restart P&G’s upward growth of market share?

2.3 THREAT OF SUBSTITUTES Substitutes do not entirely replace existing products but may introduce new technology or reduce the costs of producing the same product (Porter, 1980). Substitutes may limit the profits in an industry by keeping their prices down (Porter, 1980). The threat of substitution is quite high in this industry because consumers are able to substitute to other major retailers, convenience stores, niche product outlets, restaurants, bakeries, butchers and farmers (Coriolis Research, 2004). Supermarkets like Tesco and ASDA have a range of products and services that have close substitutes, effecting price elasticity of demand because the market is sensitive to price (IBISWorld). The demand for a particular brand or retailer will increase or decrease concurrent to the movement of price in comparison to its competition (IBISWorld). The UK supermarkets are always trying to increase the quality of products and services resulting in a constant need to differentiate products and services from competition to make them less price sensitive.

The Unilever Group’s report on ice cream stated that they saw volume growth and share gains in most markets. Specifically they saw a strong performance in Western Europe, Mexico, Indonesia and Australia. Much of this growth was due to the Magnum Gold acquisition and the marketing of this product in these markets. Product quality improvements helped their Klondike line achieve strong results in the U.S.A. The Unilever Group maintained a negative price growth in ice cream. The negative price growth reflected slightly lower gross margins, at constant currency, with commodity costs higher.