Unilever NV and Unilever PLC - Two controlling companies were set up, one English (Unilever Ltd - now Unilever PLC) and the other Dutch (NaamloozeVennootschap Margarine Unie – now Unilever NV).Unilever NV shares are listed on stock exchanges in Amsterdam and New York Unilever PLC shares listed on London Stock exchange and as American Depository Receipts in New York Stock Exchange.
Ready to Drink -- > Bottled and Canned
K6221 Business Intelligence Unilever US – Lipton Risks Management Sesagiri Raamkumar Aravind Mane Shivaji Dilip Kumar Balasubramaniam Divya Thangavelu Muthu Kumaar Selvaraju Nirmala
Agenda• Unilever – Introduction and Statistics• Lipton – Overview and Statistics• Lipton Supply Chain• Risks Management – Risk Map – Key Risks – BI Solutions and Mitigations
Unilever – Overview• Multinational Consumer Goods Company started in year 1930.• World’s third largest Consumer goods• Products sold in more than 180 countries• Dual Listed Company ( Unilever NV + Unilever PLC)• Both Unilever Shares are listed on New York Stock exchange• More than 400 brands which includes 13 one billion euro brands.• Lipton is one among them.Source - http://www.unileverusa.com/Images/ir_Introduction_to_Unilever_March2011_tcm23-226573.pdfhttp://en.wikipedia.org/wiki/Unilever#Products
Lipton• Established in 1893 as Thomas J Lipton Co•Lipton was completely acquired by Unilever in the year 1972.•Lipton is now the leading tea brand in the world•1964 - Lipton Iced Tea mix introduced in the US which forms the major share oftheir sale today.•There are more than 11 major varieties of Lipton tea with Iced Tea having 85%share in US.•1991 – Unilever created a joint venture with Pepsi Co for the marketing ofReady to Drink Source:unilever websiteSource - http://www.liptont.com/index.aspxhttp://en.wikipedia.org/wiki/Lipton
Regional, Divisional and Sales vs YOY Growth % vs Lipton Sales(in mil Euros) Net Profit Margin % 15500 3500 16 48000 14 15000 12.4 46000 3000 12 14500 10 9.6 9.2 44000 2500 8.5 14000 8 6 42000 13500 2000 4 13000 40000 1500 2 12500 0 38000 1000 -2 12000 -4 36000 500 2008 2009 2010 2011 11500 Sales(in mil Euros) 40523 39823 44262 46467 11000 0 2008 2009 2010 2011 Global YOY Growth% 0.8 -1.7 11.1 4.9 Icecream 2521 2478 2840 2890 US YOY Growth% -2.21 -1.7 14.6 4.4Beverages in US Lipton YOY Approximate 1.4 -1.65 14.5 1.72 1027 1010 1157 1177 Growth%Revenue of Lipton Net Profit Margin% 12.4 8.5 9.6 9.2US 12967 12743 14606 15251 •US zone accounts to 32.82 % of Total Sales of Unilever •Ice-cream & Beverages accounts to 18.94 % of US Division •Lipton contributes to 40.72 % of its Food Division Unilever attributes its dip in 2011 Net Profit Margin % to rise in cost of raw materials - Bloomberg
US - Lipton and Competition Bottled Water is the fastest growing beverage category!!! 79% 3%%4%% 7%% 7%%Soft Drinks and Alternative Beveragesgenerate retail sales of over 70$ billionLipton has been leading the market byintroducing innovative products suchas dieting and flavored teas backed upby smart spending on RainforestAlliance to gain access to non-auctioned tea - Teaconomics
Unilever Tea Plantations Global Tea Plantations 8 4.30% 1.90% 2.20% UV Plantation- Kenya 3.10% UV Plantation- India 2.00% UV Plantation- Tanzania China 7.90% 30.40% Taiwan 2.20% Japan 2.00% 5.20% Srilanka Korea Nepal 14.40% Vietnam 24.40% India
Lipton Supply Chain Tea Quality Assurance Packaging Information Systems Research & Development Manufacturing Suppliers Marketing Warehouse Suf Distribution folk Shipping Suffolk, Virginia Inventory Sales UVPlantations Manufacturing Consumers Endpoints
Challenges in Tea Industry•Auctioning & Brokering process is dominated by the big players includingUnilever.•Deforestation in certain countries for growing new Tea plantations.Due to the lack of global governance initiatives, there is no internationalplatform to bring together major global players to improve thesocial, environmental and economical conditions of tea producers worldwide.
Lipton SWOT Analysis • Owned by Unilever. • Long history in tea manufacturing industry. • Extensive knowledge of local culture and tastes. • Wider product range with technological superiority, e.g. Brooke Bond’s hot tea can. Unilever Brand extensions • Alliance with Rainforest Organisation. Health BenefitsStrengths • Single point of tea distribution in US from Suffolk. Geographical distance from Rainforest Alliance Tea Plantation countries • Strong financial position. • Increased health consciousness among US population Strong cash flow Constantly changing and health benefits of tea such as herbal and green tea is Market Share Consumer needs another major cause. • Supply Chain Management. • Having too many brand extensions can dilute and confuse consumer perception and give fresh and newWeaknesses competitors to seize market share. Lipton • Political unrest in certain plantation country SWOT • Alliance with Pepsi to access massive distribution Analysis network. Presence of big, well known partners drives demand further. • Technology advancements in manufacturing.Opportunities • Greater awareness of health benefits of tea. • New varieties of tea drink flavours can be launched Overcrowded market resulting Alliance with Pepsi particularly in the Ready to Drink segment. in DEMAND REDUCTION Greater awareness of health • Acquisitions of companies in developing markets. Presence of other global benefits of tea players • Overcrowded and small market with about 200 other Newer Tea drink flavours Increasing Tea Prices brands which might cause significant demand reduction. Acquisitions • Presence of other major players such as Coca-Cola and Fluctuating Economy Nestle leading to tough competition.Threats • Competition from local competitors • Indirect completion from other energy drinks like Redbull which could eat into Lipton’s market share. • Increasing Tea prices • Fluctuating Economy
Identified Risk Events/Factors BusinessRank Risk Event Likelihood Impact 1 Difficulty in Investments, expansions in D & E markets with forex fluctuation High High 2 Market capture by competitors through product changes and new partnerships Medium Very High 3 Change in customer needs and Lack of Process innovation Medium High Political unrest(Frequent violence, Political Unrest, mass strikes ,rallies and Uncertain worker 4 movement or activities) in plantation country Medium High 5 Disruption in operational capability of production and distribution Low Very High 6 Inflation in labour cotsts Medium Medium 7 Stragetic partnerships and alliances breakdown(Pepsico-Lipton) Low Very High 8 Corruption and collusion among supply chain and plantation country governments Low High 9 Low standards of working and living conditions(ex:exploitation) in tea plantations High Low 10 Uncertainity of weather patterns, water scarcity and natural calamities Low High 11 Decline in beverage consumption during recession periods Low Medium Inability to meet companys goal to source the tea in all Lipton tea bags from Rainforest Alliance 12 Certified™ estates by 2015 High Low 13 Competitors influence the brokers in the tea auction market to favour their bid. Low Medium 14 Health issues raised by activists based on scientific discoveries Low Medium 15 Failure to realize digital advetising ROI Low Low 16 Inefficient idea-to-market process lifecycle Low Low 17 5-10% of labourers are child labours in Tea Plantations High Very Low Exaggerated and misleading promotional campaigns - (MISBRANDING) with unproved and 18 questionable health facts Medium Very Low 19 Unexpected downtime with Sirius(SAP based) and Mountain internal info systems Very Low Medium 20 Non-conformance to Sustainability plan Very Low Low
Risk Classification Risk Type Description Lack of formal procedures, lack of qualityProcedure Risks control system Bureaucracy, lack of authority, lack ofDecision Risks decision supportCommunication Cultural differences, language barriers, Risks misunderstanding Knowledge Lack of formal education, lack of training, Very High Risks unskilled labor Disruption of supply, inventory and schedules, High Supply Risks incoming delays Operational Failure or breakdown of operations, changes Medium Risks in technologyDemand Risks Variations in demand, changes in technology Low Theft, counterfeiting, terrorism, piracy, Security Risks infrastructure breakdown Very Low Economic shifts, recession, labor costs, Macro Risks exchange rates, customs Actions and sanctions of governments, shifts Policy Risks in legislation Competition Uncertainty about competitors moves and Risks actions Lack of human resources, capital orResource Risks technology Unclassified Risks Unclassified