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Comparison - Unilever Vs P&G- International Business and Marketing Stategies

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  • 1. UNIQUE STRATEGIES: KEY FACTOR FOR MNCS; COMPARATIVE DISCUSSION ON STRATEGIES BY UNILEVER AND P&G. 1
  • 2. Contents Executive summary ................................................................................................................ 4 1.0 Objective and Scope ......................................................................................................... 5 2.0 Introduction...................................................................................................................... 5 3.0 Literature survey .............................................................................................................. 6 3.1 Understand Foreign Direct Investment and outsourcing ............................................. 6 3.2 Creating successful long term growth .......................................................................... 6 3.3 Globalisation not just economically but “socially” as well ........................................... 6 4.0 Industry Overview ............................................................................................................ 7 Indian scenario ............................................................................................................ 8 5.0 Data and empirical analysis .............................................................................................. 9 5.1 Unilever ............................................................................................................................ 9 5.1.1 Introduction ............................................................................................................... 9 5.1.2 New business model .................................................................................................. 9 5.1.3. Brands and innovation............................................................................................ 11 5.1.4 Market presence and place ..................................................................................... 12 5.1.5 Standardisation and adaptation .............................................................................. 13 5.1.6 Transaction exposure .............................................................................................. 14 5.1.7 Changing production strategies .............................................................................. 15 5.2 Procter & Gamble (P&G) ................................................................................................ 16 5.2.1 Introduction ............................................................................................................. 16 5.2.2 Manufacturing operations ....................................................................................... 16 5.2.3 Key Customers ......................................................................................................... 17 5.2.4 Organisation ............................................................................................................ 17 5.2.5 The strength in structure-........................................................................................ 17 5.2.6 Brands and innovation............................................................................................. 19 2
  • 3. 5.2.7 Market presence and place ..................................................................................... 20 5.2.8 Standardisation and adaptation .............................................................................. 21 6.0 Comparative Analysis ..................................................................................................... 23 7.0 Indian scenario .............................................................................................................. 27 8.0 Key Findings .................................................................................................................... 29 9.0 Recommendations ......................................................................................................... 30 9.1 Unilever....................................................................................................................... 30 9.2 P&G ............................................................................................................................. 31 Works Cited .......................................................................................................................... 33 Appendix .............................................................................................................................. 35 List Of Figures Figure 1: A new business model of Unilever ........................................................................... 10 Figure 2: Operating profit by various products ....................................................................... 11 Figure 3: Unilever Brands......................................................................................................... 12 Figure 4: Profit by region ......................................................................................................... 13 Figure 5: Staff Cost ................................................................................................................... 13 Figure 6: Various brand names of same ice-cream Wall’s....................................................... 14 Figure 7: Organisational structure P&G ................................................................................... 18 Figure 8: 2012 Net sales by business segment ........................................................................ 19 Figure 9: P&G brands ............................................................................................................... 19 Figure 10: 2012 Net sales by geographic region and by market maturity .............................. 21 Figure 11: Turnover since 2009 to 2011 Unilever vs P&G ....................................................... 24 Figure 12: Profit Before Tax For HUL (Figures are in Crores)................................................... 28 Figure 13: Profit Before Tax For PGHH and GIL (Figures are in Crores) ................................... 28 3
  • 4. Executive summary This project is about strategies and various practices by MNCs. The comparative study has been carried out between Unilever and P&G. This shows the need of transformation not in terms of products and innovations but also in terms of organisational structure. Brand innovation is very important for any FMCG company. More the product line, better the chances for sustainable growth in market. This also allows going in various markets with their needs. More market present over the world is very necessary to use scale of economy. But the growth in market should be balanced one. P&G admits that they have focused more on home market (US) than foreign market which hampering their growth now. While Unilever which is equally good in home market (Europe) and foreign market, they may catch P&G in next 5 year as per Unilever’s CEO. Brand’s merger and acquisition have major effect on growth pattern. Unilever’s acquisition and disposal pattern is very aggressive. P&G has got a lot from Gillette merger. While doing business ethics are very important for sustainable growth. Both companies were caught doing unethical practices. 4
  • 5. 1.0 Objective and Scope This research project will underline the importance of unique strategies by companies. The Unilever and P&G are two main companies in world FMCG sector. Their actions directly affects FMCG sector worldwide. This project will talk about their growth and give recommendations for their future. This is very important to study in order to clear the concepts of marketing. Pattern of market presence, mergers and acquisitions, brand innovations, and standardisation/adaption etc. is covered in the studies. This study is also important as a giant P&G is slowing down its growth while Unilever is growing with more speed than P&G. This may change the world FMCG face in near future. 2.0 Introduction Business environment is changing continuously over the years. Especially in past few decades, business environment has changed tremendously because of globalisation, financial liberalisation, development in technology, increase in mergers and acquisitions, rising of Euro as a single currency in Europe as well as crisis like recession. All these and many more factors affect the business and its activities over the world. The advancement about the monetary conditions in Asia, changes in fiscal policies, aid packages by Japan, lowered interest rates, expansion of liquidity in market, have given a helping hands to many businesses (Trade and Development Report, 2006). These issues affect the company’s strategy, structural management and development all over the world. The companies operating in different sectors show different impacts. “From market-place results that I've both caused and witnessed first-hand, one thing is certain - your failure to act may be your competitor's gain!” – Phil Barden, Decode Marketing All the multinational companies operating worldwide are needed to make their strategies to ensure constant growth to sustain in the global market. Most theories suggest that when a firm invests in a foreign market, it gets advantage over the domestic competitor, but there are many issues to be considered before investing in foreign market. The companies like Unilever, P&G are the companies which are now leading in their FMCG sectors. Project will focus on various aspects of business strategies by these two companies. 5
  • 6. 3.0 Literature survey 3.1 Understand Foreign Direct Investment and outsourcing When multinational companies operate worldwide, the FDI is a key to become a leader in the market. By tapping the factor advantages in specific countries and exploiting competitive advantage, company may achieve to lower cost of production. E.g. FDI of US companies like Apple in China helps to manufacture same product at lower cost (Koltler P., Keller K.). But it is not necessary to have FDI in every case, the Host Country may have options like joint ventures, technology licensing, and outsourcing, etc. E.g. Countries like India got benefitted by the outsourcing of IT sector jobs. So a company is able to lower the production cost and at the same time new employment is created in other country (Grover A., 2005). 3.2 Creating successful long term growth The unique new products can create entirely new market. E.g. the new digital camera market wiped out the old film camera market. At same time improvement and revision of existing products is also necessary. To become a global leader or to remain at top position, trends in marketing practices are important to be discovered. Supplier partnering, Customer partnering, Benchmarking are the example of such trends. Also various Mergers and Acquisitions help company to jump into leadership role. E.g. After acquiring Corus, Tata Steel immerged as a new global leader (Koltler P., Keller K.). HP and Compaq merger was done for the long run goals of company. 3.3 Globalisation not just economically but “socially” as well Many organisations now are going with the globalised market, use economy of scale as an advantage to develop their business worldwide. But this is not just only aspect when companies thinking about going global, there is social factor as well. No one likes to get affected by foreigner in their home country. While doing business it is very necessary to think about what as an organisation they can provide something to the society. CSR activities are very famous practices by these MNCs to create a good image in the foreign country. 6
  • 7.  Anti-Americanism America is a superpower; this is a reason why many developing and even developed countries have Anti-Americanism attitude. This is a challenge for American firms like P&G. In this case creating a very good brand image is become necessary perhaps more important than marketing a product (Bhagwati, 2007). 4.0 Industry Overview Fast Moving Consumer Goods (FMCG) goods are all consumable items (other than groceries/pulses) that one needs to buy at regular intervals. These are items which are used daily, and so have a quick rate of consumption, and a high return. FMCG can broadly be categorized into three segments which are: 1. Household items as soaps, detergents, household accessories, etc, 2. Personal care items as shampoos, toothpaste, shaving products, etc 3. Food and Beverages as snacks, processed foods, tea, coffee, edible oils, soft drinks etc. Global leaders in the FMCG segment are Nestlé, ITC, Reckitt Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi, Gillette etc. The FMCG industry changes fast and is constantly evolving. It's fair to say there is never a dull moment in FMCG. From the pace at which goods leave the shelves to the rate of product innovation and career progression, things move quickly. And it doesn't end there. The brands themselves are changing just as quickly. 40% of brands on the top 100 list twenty years ago have already been replaced by new names today. FMCG companies can beat the recession. This is an industry that has proved itself very resilient to recession – with the majority of companies in the sector weathering the financial storm in a way that very few others have managed. Why? Well, consumers will always need to buy the products created by FMCG companies. They may not buy big items like refrigerators or cars in a recession, but floors still need to be cleaned, clothes need to be laundered and aches and pains still need to be soothed (Purohit, 2012). 7
  • 8.  Indian scenario The burgeoning middle class Indian population, as well as the rural sector, present a huge potential for this sector. The FMCG sector in India is at present, the fourth largest sector with a total market size in excess of USD 13 billion as of 2012. This sector is expected to grow to a USD 33 billion industry by 2015 and to a whooping USD 100 billion by the year 2025. This sector is characterized by strong MNC presence and a well-established distribution network. In India the easy availability of raw materials as well as cheap labour makes it an ideal destination for this sector. There is also intense competition between the organised and unorganised segments and the fight to keep operational costs low.  Factors that will drive growth in this sector:  Increasing rate of urbanization, expected to see major growth in coming years.  Rise in disposable incomes, resulting in premium brands having faster growth and deeper penetration.  Innovative and stronger channels of distribution to the rural segment, leading to deeper penetration into this segment.  Increase in rural non-agricultural income and benefits from government welfare programmes.  Indian retail sector is open up for Foreign Direct Investments in both single brand and multi brand retailing. 8
  • 9. 5.0 Data and empirical analysis Theories discussed so far are about the challenges faced by the multinational companies and their necessary strategies. Project will discuss about how Unilever and P&G is working in practices. 5.1 Unilever 5.1.1 Introduction Two parent companies in the Unilever Group are Unilever N.V. and Unilever PLC. Unilever N.V. is a public limited company registered in the Netherlands. Unilever PLC is also a public limited company which is registered in both England and Wales. Both the companies present their consolidated accounts and compositely form single economic entity. Their further subsidiaries are present in every country, which are also listed in that respective country’s local stock exchange. E.g. Unilever India is listed in National Stock Exchange at Mumbai, India. After introduction of Euro, it is adopted as a base currency by the company. Before that they used Pounds Sterling as their base currency for making consolidated accounts (Unilever-Annual Report, 2005). Unilever operates in FMCG (fast moving consumer goods) sector. They have diverse range of brands which are operating internationally and some in limited regional focus only. The Top 20 brands represents around 70% of sales. Some of the Unilever’s global brands are as follows. Aviance, Axe/Lynx, , Flora/Becel, Lipton, Rexona/Sure, Sunsilk, Toni & Guy, Ben & Jerry's, Hellmann's, Dove, Omo/Surf, Lux/Radox, Heartbrand, Knorr, etc. (Annual Report 2006,pg 30) 5.1.2 New business model A traditional model of company would see development in-house in the company’s core categories. As the open innovation is necessary, there has been a revision of this traditional view at Unilever. The company is not remained just a British anymore, its truly global company. So the old British presence is removed by company and started getting maximum ethnicity employees. In old model Unilever had not made the categories in which they want go aggressively, in new model they made it very clear. 9
  • 10. Unilever made a new business model which clearly indicates that they are focusing on their disciplined execution of clearly defined growth strategy with the help of aligned organisation. Clear growth strategies Aligned orginisation Disciplined execution Figure 1: A new business model of Unilever (Source:Unilever growth strategy) (i) Organisation reforms According to the annual reports, Unilever is working with dual management structure which is constantly under reformation since 2000. Unilever claims that it is one of the most culturally diverse companies. It has 24 different nationalities’ managers who form the top level management. They are making the corporate governance stronger with the “One Unilever” programme. They are reducing management layers to make decisions faster and cope up company’s strategy in changing environment (Unilever-Annual Report, 2006). (ii) Clearly defined growth priorities According to growth strategy mentioned in the annual reports, Unilever set their priorities as follows a. Deodorants, Skin, Hair b. Ice cream, Tea c. Vitality within food d. D&E : Foods, Home care The pattern of profit making from various products gives compliment to their priority list. They are making most of their profit from Personal care and Food. 10
  • 11. Figure 2: Operating profit by various products (Source: Unilever_charts_2002-2011) Strategies by any company and priorities are dependent on their most profit making categories of total production. Their biggest rival P&G get its profit from beauty and personal care, baby care, and home care products. But compared to Unilever, P&G is weak in foods category. So Unilever wants to utilise its dominance in foods sector over the rival and at the same time give higher priority to personal care to overtake market of the rival. Rivals like P&G are making their progress with leveraging on their strong value of domestic brands which they are taking worldwide. But Unilever is sticking to more adaptation in order to provide every market a different product according to the local needs. E.g. Production processes of Sunsilk shampoo are same in every country but raw material they use in countries like Brazil is bit different to adopt with local conditions and also cheaper than one in developed regions like UK. While entering into new market, Unilever has implemented regional adaptation policy. 5.1.3. Brands and innovation In the sector of FMCG, to remain on top, a company must beat its competitors in sales. Therefore, it is necessary to make the product according to the customers’ needs. But their needs are very complex. Unilever considers its product as hero and brand it to make a better portfolio than the rivals. They test their products against the rivals’. They find out the difference- why customer is buying other product, and make changes accordingly in their product. Unilever believes in first mover’s advantage in market, so the company wants to introduce unique product in the market before anyone does. This has allowed them to make 11
  • 12. bigger profits and better customer base. E.g. Rexona for women deodorant with motionsense technology, unique fresh test of Lipton tea because of freshly picked tea leaves’ extract and preservation method. In 2012 company started with new range of products for Men which making very good profits. E.g. Dove Men+ care, Toni & Guy, Axe hair. Figure 3: Unilever Brands (Source: Annual Report Unilever 2012) The Company wants to focus on their core competency which is innovation. Unilever decided to go for outsourcing of its production processes. They outsourced administrations, monitoring and manufacturing to low wage countries. But they made it very clear that research and development is their top priority. Even though company is working with partner companies from more than one decade, they still follow strict monitoring of quality of product to ensure their standards. 5.1.4 Market presence and place Unilever is exploring new market every year to make new customer base. Their strategies are different in different countries. They are continuing with the acquisitions of local companies. Global brand name, unique product with local channels who can distribute product more efficiently- is perfect mix to sell products in FMCG sector. E.g. In India it is very difficult to reach to all people because of larger population. The program named “Perfect Store” helps Unilever to reach more number of small shops. Also these shops are getting 12
  • 13. more standardised than before which helps to attract customers. The chart below shows that the percentage of total profit comes almost equal from every region. This is the result of their strategy of market place and presence. When compared with P&G, we can clearly observe that P&G has its half revenue from America and only 16% from Asia. Unilever has equal share from different region because of its decision of acquiring regional brands. This has allowed them to have bigger market than rivals in Asia and Middle-east. Figure 4: Profit by region (Source: Unilever_charts_2002-2011) 5.1.5 Standardisation and adaptation Figure 5: Staff Cost (Source: Unilever_charts_2002-2011) 13
  • 14. Unilever is following the method of standardisation in its production process. Though the production processes are standardised by the company, the company did not standardise their products. This have allowed them to buy and manufacture products at global level and cut down their staff cost. This allows them to get more turnovers per employee. This can be clearly seen by the graph below. This strategy allowed them to lower down the manufacturing cost. Also it became simpler to control it centrally. Unilever has worldwide ice-cream business with brand name “Walls” and the company has also acquired local established brands like Ola or Algida in China. This helped them to increase customers as they can operate with both international as well as regional brands. This is because the company is studying the consumer behaviour closely and realised that some regions are likely to buy products with local names only. Figure 6: Various brand names of same ice-cream Wall’s This strategy of theirs is defined in their annual report as “Leadership for Growth Profile strategy”. With this, the company is emphasising on making revenue from multi-local regions by having economy of scale globally. This is different from rival P&G as it uses same brand names worldwide such as Pantene, Head and Shoulders, Pert Plus and Pampers. 5.1.6 Transaction exposure Due to changing economic as well as political environment, it’s very difficult to maintain the prices fixed as raw material prices also changes. Since the last decade the company has successfully reduced the amount of payables and receivables, which is nothing but the reduction in the amount of transaction exposure. Some techniques are used by the 14
  • 15. company to manage transaction exposure. For raw material and commodities, the company purchases forward contracts while they have future contracts to hedge against future price moments. About long term debts, the company has fixed interest rates, also have straightforward derivative financial instruments like interest rate swaps (Wallace, William, n.d.). 5.1.7 Changing production strategies Unilever is changing their ways of advertising and marketing with various changes in their promotional activities, pricing, and packaging activities. To cope up with large regional demand in Africa and Asia they are now more into low cost production with cheaper raw materials. P&G has failed to provide such low cost products in many developing countries. For international market, to make sure that Unilever grow with more profitability and sustain in competition in long run, they adopted a proactive approach (Wallace, William, n.d.). E.g. Cheaper products like low range of Sunsilk has been introduced in Brazil. 15
  • 16. 5.2 Procter & Gamble (P&G) 5.2.1 Introduction The Procter & Gamble Company also known as P&G, is an American multinational consumer goods company headquartered in downtown Cincinnati, Ohio, USA. Its products include pet foods, cleaning agents and personal care products. Prior to the sale of Pringles to Kellogg Company, its product line included foods and beverages. In 2012, P&G recorded $83.68 billion dollars in sales. Fortune magazine awarded P&G a top spot on its list of "Global Top Companies for Leaders", and ranked the company at fifth place of the "World's Most Admired Companies" list. Chief Executive Magazine named P&G the best overall company for leadership development in its list of the "40 Best Companies for Leaders." 26 of P&G's brands have more than a billion dollars in net annual sales, according to the 2011 Annual Report and P&G Corporate Newsroom. Most of these brands—including Bounty, Crest and Tide—are global products available on several continents. Procter & Gamble products are available in North America, Latin America, Europe, the Middle East, Africa, Asia, Australia and New Zealand. 5.2.2 Manufacturing operations Manufacturing operations are based in the following regions:  United States  Europe  Canada  China (31 wholly owned factories) and other parts of  Philippines  Mexico  Africa  Latin America  Australia 16 Asia
  • 17. 5.2.3 Key Customers P&G customers include mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores. Sales to Wal-Mart Stores, Inc. and its affiliates represent approximately 14%, 15% and 16% of our total revenue in 2012, 2011 and 2010, respectively. No other customer represents more than 10% of our net sales. Our top ten customers account for approximately 31% of our total unit volume in 2012, and 32% of our total unit volume in 2011 and 2010. 5.2.4 Organisation P&G business model relies on the continued growth and success of existing brands and products, as well as the creation of new products. The markets and industry segments in which P&G offer their products are highly competitive. P&G products are sold in more than 180 countries around the world primarily through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons and in high-frequency stores, the neighbourhood stores which serve many consumers in developing markets. P&G work collaboratively with our customers to improve the in-store presence of our products and win the "first moment of truth" - when a consumer is shopping in the store. P&G must also win the "second moment of truth" - when a consumer uses the product, evaluates how well it met his or her expectations and decides whether it was a good value. P&G believe they must continue to provide new, innovative products and branding to the consumer in order to grow their business. Research and product development activities, designed to enable sustained organic growth, continued to carry a high priority during the past fiscal year. While many of the benefits from these efforts will not be realized until future years, they believe these activities demonstrate their commitment to future growth. 5.2.5 The strength in structureP&G’s organization structure an important part of their capability to grow. It combines the global scale benefits of a $83 billion global company with a local focus to win with consumers and retail customers in each country where P&G products are sold. 17
  • 18. Figure 7: Organisational structure P&G P&G’s structure has removed many of the traditional overlaps and inefficiencies that exist in many large companies.  Global Business Units (GBUs) focus solely on consumers, brands and competitors around the world. They are responsible for the innovation pipeline, profitability and shareholder returns from their businesses.  Market Development Organizations (MDOs) are charged with knowing consumers and retailers in each market where P&G competes and integrating the innovations flowing from the GBUs into business plans that work in each country.  Global Business Services (GBS) utilizes P&G talent and expert partners to provide best-in-class business support services at the lowest possible costs to leverage P&G’s scale for a winning advantage.  Lean Corporate Functions ensure on going functional innovation and capability improvement. 18
  • 19. CategoriesP&G have divided their products in segments as Beauty  Grooming  Health Care  Fabric Care & Home Care  Baby Care & Family Care. As the chart below shows that maximum of their business is from Fabric Care & Home Figure 8: 2012 Net sales by business segment Care. Figure 9: P&G brands 5.2.6 Brands and innovation P&G have their C+D program which is very unique from others.  What is Connect + Develop? It's P&G’s version of open innovation: the practice of tapping externally developed intellectual property to accelerate internal innovation and sharing our internally developed assets and know-how to help others outside the Company. Historically, P&G relied on internal capabilities and those of a network of trusted suppliers to invent, develop and deliver new products and services to the market. P&G did not 19
  • 20. actively seek to connect with potential external partners. Similarly, the P&G products, technologies and know-how they developed were used almost solely for the manufacture and sale of P&G's own products. Beyond this, they seldom licensed them to other companies. Times have changed, and the world is more connected. In the areas in which P&G do business, there are millions of scientists, engineers and other companies globally. Why not collaborate with them? P&G now embrace open innovation, and we call our approach "Connect + Develop." Today, open innovation at P&G works both ways — inbound and outbound — and encompasses everything from trademarks to packaging, marketing models to engineering, and business services to design. It's so much more than technology.  How Does It Work? Connect+Develop is a P&G innovation strategy. The idea of partnering externally to accelerate innovation is applied across the Company and around the world in all our work and with all our brands. Within P&G, we have a global team dedicated to empowering C+D, searching for innovations, working with prospective partners and shepherding breakthrough innovations through the Company and into market. That dedicated team is called Global Business Development. 5.2.7 Market presence and place The charts below show that P&G have their majority market in developed countries. Only 38% of total revenue is from developing countries. The main focus of P&G is on their developed country market. As being an American firm, company get maximum revenue from North America. The chart shows clearly that P&G have more effective market in America and Europe than any other geographical region that they operate. 20
  • 21. Figure 10: 2012 Net sales by geographic region and by market maturity 5.2.8 Standardisation and adaptation Global Standardization Strategy is the strategy P&G is pursuing now. Initially, when they first entered foreign markets, the P&G strategy was International Strategy. Procter and Gamble identified the increasing globalisation of business and resultantly altered their business strategy and structure in order to maximise exposure in more countries in order to: remain competitive internationally, benefit from economies of scale; and to maximise revenues, profits, share price and return on invested capital. To facilitate the implementation of their global strategy CEO, Lafley, changed the structure from a “Global Product Structure”, which is often associated with a standardisation strategy and implemented a “Transnational” global strategy, and implemented a hybrid organisational structure that considered the geographical dispersion of multiple marketplaces, respective specialisation for particular brands and specialisations and economies of scale in particular value creating functions. Since all the activities of production and marketing happen only in a few places, this strategy becomes inefficiently when the need of a quickly response is increasing. Some markets have emerged as an excellent case study for company on these international standardisation strategies. Take an example of Diaper case in China. When Procter & Gamble set out to sell Pampers in China more than a decade ago, it faced a daunting marketing challenge: P&G didn't just have to persuade parents that its diapers were the best. It had to persuade many of them that they needed diapers at all. The disposable diaper — a throwaway commodity in the West — just wasn't part of the cultural norm in the Chinese nursery. Babies wore cloth diapers, or in many cases, no diaper at all. And that, says 21
  • 22. Bruce Brown, who's in charge of P&G's $2 billion R&D budget, is why China presented — and still presents — such a huge opportunity. Today, after years of exhaustive research and plenty of missteps, Pampers is the No. 1selling diaper in China and the company, in many ways, is just getting started there. The diaper market in China is booming. When P&G first launched Pampers in China in 1998, the effort flopped. Instead of developing a unique product for the market, P&G made a lower-quality version of U.S. and European diapers, wrongly assuming that parents would buy them if they were cheap enough. 22
  • 23. 6.0 Comparative Analysis The main comparative difference between these two companies is their Key Segment. We can clearly observe that Unilever is mainly with Foods and Personal Care while P&G is leading with Fabric & Home Care. Unilever get about 80% of total revenue from Personal Care and Foods while P&G get about 60% of revenue from Beauty and Fabric & Home Care. Unilever have generated profit almost equally from all their geographic regions, while P&G is more effective with its American and European market. About 60% of total revenue of P&G is from North America and Western Europe only. If the origins of companies have taken into consideration then this project can say that American way of taking advantage of scale production have good impact and efficient but does not give guarantee in every market region. British way of market adaption is more likely to attract customers equally from every region. This can also be extended to their largest retail operators Walmart (American) and Tesco (British). The major part of revenue generation for P&G is Walmart support, so as Walmart is not doing well in many developing countries and also not even operating in many countries as a restriction by government on foreign investment. This will definitely hamper P&G’s revenue.  P&G admits errors and slows expansion: Procter & Gamble vowed to halt its expansion into new markets and focus on the biggest emerging economies as it cut earnings and revenue forecasts and acknowledged it had overstretched. Bob McDonald, chief executive for the past three years, admitted the company had made errors and should have produced better results. “We will continue to expand our developing market portfolio, but we will do it on a more balanced pace,” -Bob McDonald, chief executive The strategic shift sets P&G apart from peers such as Colgate-Palmolive and Unilever, which continue trying to expand aggressively, albeit as smaller businesses in relative terms. P&G, the world’s biggest consumer’s goods maker by sales, will tighten its focus on the 10 most important emerging markets and not enter any new ones, while trying to revive growth in its US home, where it has lost market share. 23
  • 24. From the charts below, it can be observed that Unilever have managed to grow revenue by 10 million dollars but P&G couldn’t. This supports the view of their chief executive. (P&G, 2012) 90 80 81.1 77.56 75.29 70 62.55 58.33 60 52.47 50 Unilever (in Million $) 40 P&G (in Million $) 30 20 10 0 2009 2010 2011 Figure 11: Turnover since 2009 to 2011 Unilever vs P&G (Source- Annual Reports of Unilever and P&G)  Unilever CEO Expects to Catch P&G in Five Years Unilever's CEO Paul Polman admitted that his company had grown "too little" over the past 10 to 15 years, but said he expects it to catch up with rivals such as Procter & Gamble (PG) within the next four or five years. Unilever closed 2010 with over $58 billion in sales while P&G's revenues were a little under $80 billion. Even with a conservative growth rate of 4%, P&G's revenues by 2015 can be expected to be over $97 billion. So "catching up with P&G" by 2015 translates into Unilever growing at almost 11% year-on-year over the next five years. Unilever aims to generate 70% of its sales from emerging markets like India and China. While this is an admirable goal, successful growth pushes into emerging markets are difficult to achieve -- and often not very profitable. (Trifs, 2011) 24
  • 25.  Unilever and Procter & Gamble fined £280m for price fixing Both the companies are growing over a time but what about doing the business in right way? Both have failed to do business ethically in European region. Unilever and Procter & Gamble have been hit with fines totalling €315.2m (£281m) for fixing the price of washing powder in eight European countries. The European Commission imposed the penalties April 2012 after finding that the consumer goods groups had colluded over prices for more than three years. P&G must hand over €211.2m, while Unilever will pay €104m. Both fines were reduced because the companies co-operated with the investigation and agreed to settle. (Wearden)  Unilever, P&G War Over Which Is Most Ethical Bill Gates recently mentioned Unilever as a top-of-mind example of a company involved in sustainability efforts in a CNBC interview from the World Economic Forum in Davos, Switzerland. "We are seeing, particularly with the new generation of young business people and young marketers, that they are only attracted to companies that fit with their own value set" -Kevin Havelock, president of Unilever U.S. P&G's Pur has one of the most elaborate cause-marketing efforts -- a $20 million program that aims to purify 2 billion liters of water in Africa and save 10,000 lives by 2012. It's clear that ethical marketing really can make a difference in people's lives. For example, since P&G's Pantene launched its Beautiful Lengths program in 2006 to solicit locks of hair to be woven into wigs for women receiving cancer treatments, it has gotten enough donations to make 3,000 wigs. Compare that to the 2,000 wigs created over 10 years by the previously existing charity in the space, Locks of Love. "Once there, a company or a brand that has a social responsibility position or a sustainability position will then have an edge over other brands." -Mr. Havelock, Unilever It is very clear that both the companies want to have a good image in the market so as to utilise it as a competitive advantage over the other. The P&G’s campaign during Olympics 25
  • 26. 2012 called “P&G- Mom” had created a very good impact over the European market. (Neff, 2008)  Brands, mergers and acquisitions "I'd love to buy more global brands. The climate for acquisitions is good, the climate for mergers is good," - P&G CEO Bob McDonald (2010) One reason for McDonald's interest in global brands is it can be an easy route to extend its current business. For example, P&G bought Ambi Pur, an air freshener brand, from Sara Lee Corp. this year. As a result, P&G was able to expand its Febreze line of air freshener products, growing its penetration from 15 to 85 countries. The most stunning in recent years was the company's purchase of Gillette for $57 billion in 2005. The acquisition brought P&G such well-known brands as Braun, Duracell and Oral-B, as well as Gillette's signature razor line. Executives at the companies said they believe they'll both be able to grow faster together than separately, with P&G opening doors for Gillette in markets such as China and Japan while Gillette bringing P&G some product segments that are growing faster than the company's overall current portfolio of products. Because of expectations from the deal, P&G raised the annual revenue growth outlook to 5 to 7%, rather than its earlier target of 4 to 6% (Barry Silverstein, 2010). P&G was mainly into women cosmetics and Gillette was in men grooming. The merger between Procter & Gamble and Gillette comes with the obvious chemistry of male and female product lines, but the two companies also share a culture of innovation and a history of cooperation, according to Wharton faculty and industry analysts. (Appendix-1) Due to various reasons it is very difficult for organisation to entre in food market in foreign country (Appendix- 4). Unilever gets its majority of revenue from food section. It was very necessary for them to get that Food sector open in maximum countries. The Ben & Jerry merger with Unilever helped them a lot. The market power of Unilever is undeniable. Unilever South Africa employs directly or indirectly almost 1% of the country’s workforce. Unilever Vietnam contributes 1% of the gross domestic product (GDP) of the country. 26
  • 27. Unilever’s acquisition list is very big (Appendix- 3) and allowed them to penetrate into foreign markets very efficiently. 7.0 Indian scenario P&G is working with two business entities in India.  Procter & Gamble Hygiene and Health Care Limited (PGHH)  Gillette India Limited (GIL) “India remains a high priority market for Procter & Gamble (P&G) and the consumer products major has set itself the objective of maintaining a number one or number two position in every functional category” - Espirito Santo Securities Research According to a report by Espirito Santo Securities, P&G wants to localise production as also have vertical portfolio across tiers. P&G is still catching up in terms of increasing the distribution network and new capacity addition demonstrates long-term commitment of the firm. Unilever is working as Hindustan Unilever India (HUL) in India. “Unilever is investing highly in fast-growing emerging markets like India” -British Prime Minister David Cameron Unilever has used the visit of British Prime Minister David Cameron to its Hindustan Unilever business in Mumbai to announce that it is investing €50 million to set up its first Asian aerosol deodorant manufacturing facility in Khamgaon, Maharashtra. Prime Minister David Cameron said: "It’s great to be visiting Unilever’s Indian Headquarters today - more than 120 years since Sunlight soap, one of Unilever’s earliest products, was first exported from Britain to India. Unilever is a shining example of how a business with British roots can succeed in India and beyond and I’m delighted to hear they’re expanding further investing over £40 million in a new manufacturing plant in Khamgaon to service the emerging Indian and South Asian markets." (Unilever Press release, 2013) Though P&G is ahead of Unilever in world market, Indian scenario tells different story. 27
  • 28. 25000 22800 20285 20000 18220 15000 HUL 10000 5000 0 2010 2011 2012 Figure 12: Profit Before Tax For HUL (Figures are in Crores) (Source- HUL Annual Report) 250 233 233.6 212.76 200 178.7 150 133.97 116.97 PGHH GIL 100 50 0 2010 2011 2012 Figure 13: Profit Before Tax For PGHH and GIL (Figures are in Crores) (Source- PGHH Annual Report, GIL Annual Report) 28
  • 29. 8.0 Key Findings P&G has very strong home market (US Market) which company can leverage for foreign market investment. Unilever preferred to go with more local adaptation than P&G. P&G is very aggressive in terms of their R&D activities where Unilever need to focus. One of the key success factors for P&G in comparison to Unilever is their market research undertakings and consumer understanding. Instead of focusing their products on a lowgrowth market such as the food sector, they analysed key trends and market needs and decided to establish themselves in high-growth markets. Such decisions were aided by thorough market research planning and identifying areas for improvement and differentiation. Organisational reforms by both the companies are nothing but effect of highly changing global market and its requirements. Unilever managed to penetrate in most of the developing countries because of their brand merger and acquisition plan. The list in Appendix 3 is very big which shows degree of aggressiveness. P&G got major push by merger with Gillette. It has helped them to increase their product line horizontally (Male & Female grooming, Detergents, Soap, etc). Also Gillette has very good business in developing countries, which helped P&G to establish themselves outside America and Europe. Though Unilever is proudly saying that they are very ethical while doing business, both Unilever and P&G were caught in Europe for price fixing of Detergent products. If Indian scenario is taken into consideration then “P&G + Gillette” is not even close to Unilever’s market. Unilever has very strong rout in Indian Market. CSR activities by HUL are also very famous. 29
  • 30. 9.0 Recommendations This comparison clearly shows P&G is a leader in the world industry revenue and size wise. Unilever can learn from P&G and further develop itself as a leader. The way both companies operating now, it is very clear that Unilever have clear chance to be leader, if P&G not act differently. Taking into consideration the analysis provided, Global Strategy Advisors believe that there is considerable opportunity for Unilever to strengthen its profitability and sustainability. 9.1 Unilever  Products More scale production (economy of scale) necessary. More vertical integration will help a lot. Male grooming is new sector for improvement, as Gillette not growing as per expectations. Unilever is getting main revenue from its Food sector. If Unilever want to catch up with P&G then they have to concentrate on their Home care products and Cosmetics as well.  Market Unilever is getting its revenue almost equally from all regions. Most of developing markets is covered by Unilever, but need higher market share in China because P&G is having very strong position in China. The consumer market of US and Europe is very big. Competitors like P&G is having higher market in US and Europe. Unilever need to think about investing more in those regions and be more aggressive.  R&D Unilever need to matchup with P&G’s aggressive R&D activities. Unilever being a traditional company was totally depending on company’s internal innovation only. But in recent years they have realised the importance of open innovations so as to be more competitive with competitors.  Ethics HUL is known for their good business, CSR activities. But they are caught once in Europe for price fixing. This should not happen again in future. Especially country like India, where 30
  • 31. people are very religious and sensitive company must do business ethically. Otherwise it will be very hard to regain trust if they lose it by some unethical practices.  Indian market Strong Indian market gives pleasurable relief to Unilever. World market should learn from Unilever’s innovative marketing strategies in India, that how to stay unaffected in any situation. British prime minister in his recent visits to India has underlined the importance of Indian market for company like Unilever. Big emerging consumer market in developing countries is very important. Company may recover their loss (due to recession in developed countries) in these markets. 9.2 P&G  Products Should continue with scale production but adaption to local market is necessary. There is possibility that some countries may refuse to use products because they have some emotions attached to it. Male grooming is new sector needs more focus as Gillette not growing as per expectations.  Market Most of developing markets are not covered effectively, but need more market share and effective penetration in India and other countries, like in China. Till date, P&G don’t have manufacturing unit in India. Here they are making a big mistake. P&G is leveraging their US market status to enter into new market. They must give something different to the new market rather than just cheap or worldwide famous brands. More CSR activities in developing countries may increase consumer’s awareness about company.  R&D Need to continue with open innovation, C+D program (Connect + Develop). Also need to do R&D for localisation of product. The main reason behind success of P&G is its aggressive innovation practices. They keep their innovations open to all. They not just depend on their internal innovation and R&D, but they want to get new ideas from anyone from world. 31
  • 32.  Ethics Company was caught while doing unethical practices. This should not happen in future. Corporate sustainability is very important. Especially country like India, where people are very religious and sensitive company must do business ethically. Otherwise it will be very hard to regain trust if they lose it by some unethical practices.  Indian market P&G and Gillette have very small market capitalisation in India than Unilever. To stop Unilever form growing faster than them, P&G should concentrate on Indian market. In recent news, CEO of P&G Bob McDonald has said that, they want to invest in Indian market. This allows them to recover losses from other part of the world. This shows the importance of Indian market. 32
  • 33. References Barry Silverstein, 2010, P&G Goes Shopping for Brands, viewed 25 feb 2013, <http://www.brandchannel.com/home/post/2010/09/07/PG-Shopping-for-Brands.aspx > Bhagwati, Jagdish, 2007, In defence Of Globalisation, Oxford University Press. Geoffrey Jones, 2002, Unilever—A Case Study , Viewed 24 May 2012,<http://hbswk.hbs.edu/item/3212.html> Grover A., 2005, Outsourcing Versus Foreign Direct Investment:A Welfare Analysis, viewed 12 May 2012, <http://www.cdedse.org/pdf/work140.pdf> MacDonnel F, 2007, Online Advertising Case Study: Unilever, Unilever Shows That Online Advertising Does Boost Key Brand Metrics Neff, J. (2008, March 2). Advertising Age. Retrieved Feb 18, 2013, from http://adage.com/article/news/unilever-p-g-war-ethical/125460/ P&G, U. a. (2012). Unilever and P&G. Purohit, 2012, FMCG Sector, Viewed 28 Feb 2013, <http://info.shine.com/Article/FMCG/FMCG-industry-overview/4261/cid780.aspx> Strategies for market entry, n.d., viewed 4 June 2012, <http://www.oxbridgewriters.com/essays/marketing/strategies-for-market-entryexpansion.php> Trifs. (2011, June 21). Daily Finance. Retrieved Feb 19, 2013, from http://www.dailyfinance.com/2011/06/21/unilever-ceo-expects-to-catch-pandg-infive-years/ The Career Innovation Group, 2010, Case Study: Unilever ‘Hot Chilli’ Unilever, < http://www.unilever.com/> Unilever-Annual Report, 2005, viewed 26 May 2012, <http://www.unilever.com/investorrelations/annual_reports/archives/#tcm:13-88539> The HP way, n.d., viewed 4 June 2012, < http://www.hpalumni.org/hp_way.htm> Unilever-Annual Report, 2006, viewed 26 May 2012, <http://www.unilever.com/images/ir_06_annual_review_en_tcm13-88516.pdf> 33
  • 34. Unilever-Brands and highlights, 2010, viewed 26 May 2012, <http://www.unilever.com/images/Brands_and_highlights_AR10_tcm13-259489.pdf> Unilever growth strategy, viewed 28 May 2012, <http://www.unilever.com/investorrelations/annual_reports/archives/#tcm:13-88539 > Unilever Press Release, 2013, Viewed 25 Feb 2013, <http://www.unilever.com/mediacentre/pressreleases/2013/unileverinvestinginfastgrowin gemergingmarkets.aspx> Wearden, G. (n.d.). Retrieved Feb 20 , 2013, from The Guardian: http://www.guardian.co.uk/business/2011/apr/13/unilever-procter-and-gambleprice-fixing-european-commission 34
  • 35. Appendix  1: P&G + Gillette Growth Abroad Article from, “Boy Meets Girl: Gillette and P&G Hook up Their Brands”; Published: March 30, 2005. Because both companies are struggling with slow growth in the consumer products industry, international expansion is another driver of the merger. P&G has 106 plants in 41 countries and Gillette has 31 plants in 14 nations. J.P. Morgan estimates that the combined company will generate between $17 billion and $18 billion in sales, or about 20% of total revenue, from developing markets. "The primary strategic rationale for the deal is the opportunity to leverage exposure in emerging markets," J.P. Morgan analyst John Faucher told The Wall Street Journal, adding that Gillette is strong in India and Brazil, while P&G has strength in Japan and China. Faucher, like other analysts, questions the price. "While the deal clearly makes P&G bigger, we are not convinced that being larger is worth $55 billion," he told The Journal. "We also do not view P&G's track record on acquisitions as stellar, as it has had problems with much smaller acquisitions in the past, especially in driving top-line growth." The companies expect to reap $14 billion in cost savings. P&G says the merger will result in the loss of 6,000 jobs, or about 4% of the combined workforce of 140,000. "They paid a lot of money, and obviously they can do the numbers," says Hoch. "I do think there are some cost savings and I think there might be a few synergies on the global front where P&G is better-established in some countries than Gillette." The biggest beneficiary of the deal might be investor Warren Buffett, who owns 9% of Gillette. Buffett called the acquisition a "dream deal." Meanwhile, the P&G/Gillette merger could put additional pressure on other consumer products firms, such as Unilever, Nestle, Kimberly-Clark and Colgate-Palmolive, analysts predict. "P&G has abundantly shown over the last few years [that] when done right, a broad portfolio offers suppliers opportunities to leverage R&D and technology expertise, purchasing and pricing power, and new product development," Prudential Equity Group 35
  • 36. analyst Constance Maneaty told The Journal. "We think that if P&G believed there were benefits to being bigger and more powerful, the writing is on the wall for the rest of the industry." According to Reibstein, the merger runs somewhat counter to the recent trend in business strategy to emphasize internal growth over expansion through acquisition. "It's interesting because we're in an era now where there's a push for us to get organic growth, and this is not in that direction," he says. "This is the old way."  2: SWOT analysis of P&G + Gillette Strengths and Weaknesses Not only is Gillette a popular brand amongst the consumer but is also parent to many other reputable and well-known brands such as Braun Oral-B line and Duracell. A strong brand shows that customers are well aware of the company’s product and have a positive perception about it Gillette gains a lot from this strength by practicing a premium pricing strategy for these brands. The strength of these brands can be judged by the fact that Gillette's razors that are the most expensive in the market dominate it with 34 market share in United States. Gillette's product have a reputation of dominating the markets they enter . Examples of product leadership in the world market in 2003 are Gillette blade and razor portfolio which had a 72 .5 share Venus female shaving equipment which has a 32 share , Duracell with a 39 share in the alkaline battery category and Oral-B brand increased its leading global share of the 2005 . Dominating markets in so many categories increases the overall value of the company and gives it think ahead of surviving competition. The large amount of sales volume also gives the company economies of scale. Gillette's product portfolio is well diversified. It product portfolio includes shaving equipment, batteries, oral care and personal care products. Diversification allows the company to minimize risk of market slumps Gillette has recently experienced a turnaround in the form of business process reengineering and re-structuring of the organization and which has ended with a policy of 36
  • 37. continuous processes evaluation and improvement. This turnaround has led to a large increase in sales along with a reduction in overhead expenses. This has resulted in an increase in profit margin from 18 .5 in 2002 to 21 .7 in 2003. In the same way Return on invested capital has also increased from 23 in 2002 to 28 in 2003. Also the liquidity of the company has become more favourable with an increase of 33 between the two years. Although Gillette has a well-diversified portfolio most of its profits come from its razors and blades business (68) which is its primary business. Even with a diversified portfolio this makes the company highly dependent on its performance in this market. As a global giant with such high stakes this position is highly risky Gillette acquired Duracell in 1996. Since then the company has been unable to come up with any break through innovation for this brand. Most of the market share Gillette has managed to gain for the new alkaline battery that has been launched after the acquisition is the market share of Duracell's older copper and black battery. Because of lack of differentiation Gillette's premium price strategy for Duracell's Ultra has failed. In fact, tough competition has brought down the prices and reduced the margin of this product. Profit margins roughly halved between 1999 and 2002 (from 22 in 1999 to 11 in 2002). Reduction of manufacturing overheads and decreased advertising expenditure has increased the profit margin in the later years. However, Gillette's competitors Royavac and Energizer still have lower operating margins. In 2003, Gillette's major revenues of a whopping 13 were generated through a single customer which is Wal-Mart Stores. Similar proportion of revenues has been generated from Wal-Mart in the years before 2003 as well. This situation makes Gillette's revenue vulnerable to the performance of a single customer just like Gillette's revenues are vulnerable to the condition of one product market. Gillette should consider building strategic relationship with other customers to diversify its risk Opportunities and Threats Gillette is known for constantly introducing new products in the market with better technology and performance. Most of the products it has introduced have done well in the 37
  • 38. market have earned a lot of appreciation . An example of its innovation is its CorssAction Vitalizer which was launched in 2003. The product did not just do well for itself but also improved its manual brushing business as well. The consumer goods industry is characterized by the fact that the manufacturers operating within it must consistently introduce newer and better products to serve customer needs. M3Power, a powered wet shaving system for men and Passion Pink Venus, the new shaving system for women are expected to further improve the company's performance in 2004. . Backed by state-of-theart Research and Development facilities, Gillette is in good position to exploit the opportunity for newer products As already discussed Duracell is being viewed as a liability and burden on Gillette by critics. This is because Gillette has yet to show break-through innovation in the batteries product line like it has shown in other sectors. Another criticism is that its only new product offer has a market share which is composed mostly of the Duracell's old copper and black battery market. True , the Ultra has grabbed 13 .5 of the U .S. market so far , and Duracell claims it generates fat profit margins But most of that market share has been cannibalized from Copper Black .Thus, Gillette should see this as opportunity for expanding its market share The large and fast-growing Chinese battery market is good starting point to start. Keeping this in mind, Gillette has bought a majority ownership in shares in the Fujian Nanping Nanfu Battery Company, which was the market leader in China at that time. The increased demand produced by China is likely to create economies of scale for Gillette and hence bring down the costs Oral B offers a lot of opportunity for Gillette. It has the distinction of being the only brand that offers a toothbrush portfolio that extends from manual to high-end power. Gillette can introduce this product to many international markets as a unique product and hence face little competition. Gillette is threatened by two main factors in its shaving product Mach3 One is that of imitations and the other is of disposable razors. These two factors are consistently putting pressure on the company's market share. Both imitations and disposables are priced lower than the Mach3 product and therefore customers may find it attractive to switch to these 38
  • 39. alternatives. Gillette's own disposable razor is competing with Mach3. This is a test of consumer loyalty. It is yet to be seen how long it takes for consumers to loss interest in the superior experience offered by Mach3, for a more affordable good enough shavers. . Therefore, the rapid narrowing of the quality gap between the latest systems and the latest disposable could have negative implications. Gillette's strategy so far is to introduce products produced using state-of-art technology and backed by through research. Thus products introduced by Gillette are of exclusive quality and have a large amount of Research and Development investment behind them. It is only fair that the company charges a premium price to recover their expenditure However, Channel migration and consumer resistance over high prices is putting pressure on Gillette to cut down the prices of its products. Gillette's pricing power in blades is under pressure on multiple fronts as consumers migrate to value channels .These pressures are being compounded by the growing consumer resistance to paying ever-higher prices for razors and blades. As an organization with global operations and with a product portfolio diversified into many markets Gillette has to face a lot of competition. One of its major competitor is Energizer Holdings which has acquired blade and razor business from Schick's and the Wilkinson Sword a blade and razor business in some countries from Pfizer. Schick's four blade razor Quanttro also give competition to Gillette's Sensor, Mach3 and Fusion. As already mentioned Gillette is facing the toughest competition in the alkaline battery market against Energizer and Royavac . In the razor and blades market product differentiation and value added advantages has given Gillette a comfortable edge. However, lack of differentiation in the battery market has caused a price war between market players. Source: <http://www.mightystudents.com/essay/Gillette.Merger.Aquisition.18247#ixzz2M1hiBgXg> 39
  • 40.  3: Acquisition and Disposal by Unilever Year wise history of Brand Acquisition and Disposal by Unilever 2013 Skippy 31 January 2013: Unilever completed the sale of its global Skippy business to Hormel Foods, excluding the portion operated out of China, which remains subject to regulatory approval and is expected to close later in 2013. 2011 Alberto Culver 10/05/2011: Unilever acquired the Alberto Culver Company. 2010 Sara Lee 6 December 2010: We completed the acquisition of the Sara Lee Personal Care and European Laundry business for €1.2 billion. Some of the leading brands included in the transaction are Radox and Duschdas in skin cleansing, Zwitsal and Fissan in baby care, and Prodent and Zendium in oral care. EVGA 28 September 2010: Unilever and EVGA announced that we would acquire EVGA’s ice cream brands and distribution network, enriching our ice cream portfolio in Greece. Brands include Scandal, Variete and Karabola. Consumer tomato products in Brazil 24 September 2010: We announced an agreement to sell Unilever’s consumer tomato products business in Brazil to foods company Cargill for approximately €260 million. The sale 40
  • 41. includes the Pomarola, Tarantella, Elefante, Extratomato and Pomodoro brands, and a manufacturing facility. Ampere Life Sciences 16 September 2010: Unilever announced we had entered into a partnership with Silicon Valley-based Ampere Life Sciences. Under the partnership, we will have access to Ampere’s Digital Biology technology platform and secure exclusive rights for the development of innovative consumer products. Diplom-Is 19 August 2010: We signed an asset purchase agreement with Norwegian dairy group TINE, to acquire the activities of Diplom-Is ice cream operations in Denmark from 30 September 2010. The transaction included five distribution centres across the Denmark. Italian Frozen Foods 19 July 2010: Unilever announced the signing of a binding agreement for the sale of our Italian Frozen Foods business, Findus, for €805 million. The sale includes a factory in Cisterna, Italy. Shedd’s Country Crock 18 January 2010: We signed a definitive agreement to sell our Shedd’s Country Crockbranded chilled side-dish business in the US to Hormel Foods Corporation. Ownership of the Shedd’s Country Crock trademark and its flagship spreads product range remained with Unilever. 2009 JohnsonDiversey 24 November 2009: We completed the sale of our total interest in JohnsonDiversey, after reducing our equity from 33% to 4% on 7 October 2009. 41
  • 42. Baltimor Holding ZAO 3 July 2009: We completed the acquisition of the sauces business of Baltimor Holding ZAO, the leading ketchup business in Russia. The acquisition included ketchup, mayonnaise and tomato paste brands and a production facility near St Petersburg, strengthening Unilever’s dressings portfolio in a key country. Vietnam 23 June 2009: We announced we had invested an undisclosed amount into our subsidiary in Vietnam. The transaction increased our ownership of the business to 100%. Previously Vinachem owned a 33% share in the subsidiary. TIGI 4 April 2009: We completed the acquisition of the global TIGI professional hair product business and its Advanced Education Academies for €411.5 million, adding a range of established salon brands to our consumer haircare portfolio. The transaction was first announced on 26 January 2009. Napoca 24 February 2009: Unilever agreed to acquire the iconic Romanian ice cream brand Napoca, as part of our expansion into the country’s ice cream market. 2008 Bertolli olive oil & vinegar business 23 December 2008: We completed the disposal of our Bertolli olive oil and vinegar business to Grupo SOS, for a consideration of €630 million. The transaction was structured as a worldwide perpetual licence by Unilever of the Bertolli brand in respect of olive oil and premium vinegar. The transaction included the sale of the Italian Maya, Dante and San Giorgio olive oil and seed oil businesses, as well as the factory at Inveruno, Italy. 42
  • 43. Edible oil business in Côte d’Ivoire 4 December 2008: We completed the sale of our edible oil business in Côte d’Ivoire, together with our interests in local oil palm plantations Palmci and PHCI, to SIFCA, the parent company of an Ivorian agro-industry group, and to a 50:50 joint venture between two Singapore-based companies, Wilmar International Limited and Olam International Limited. At the same time we acquired the soap business of Cosmivoire, a subsidiary of SIFCA. Komili 31 October 2008: We completed the sale of Komili, our olive oil brand in Turkey, to Ana Gida, part of the Anadolu Group. North American Laundry 9 September 2008: We completed the sale of our North American laundry business in the US, Canada and Puerto Rico to Vestar Capital Partners, a leading global private equity firm, for a face value of US $1.45 billion. These businesses had a combined turnover in 2007 of approximately US $1.0 billion. Lawry’s & Adolph’s branded seasoning blends & marinades 31 July 2008: Unilever completed the sale of our Lawry’s and Adolph’s branded seasoning blends and marinades business in the US and Canada to McCormick & Company Incorporated for €410 million. The combined annual turnover of the business is approximately €100 million. Inmarko 2 April 2008: We completed the acquisition of Inmarko, the leading Russian ice cream company. The company had a turnover in 2007 of approximately €115 million. 43
  • 44. Boursin 3 January 2008: We completed the sale of the Boursin brand to Le Groupe Bel for €400 million. The turnover of this brand in 2007 was approximately €100 million. Lipton With effect from 1 January 2008, Unilever entered into an expanded international partnership with Pepsico for the marketing and distribution of ready-to-drink tea products under the Lipton brand. Source- Unilever Website  4: Local Market For Food Multinational firms face resistance to expansion into local markets in countries with a strong sense of nationalism or customer loyalty. In Scandanavian countries, national firms lead total food sales; in East Asian countries, consumers show strong support for locally owned and managed companies. In both Korea and Japan, the top four food manufacturing firms are nationally owned. Unilever’s lackluster ice cream showing in Norway is directly attributable to Scandanavian buyer avoidance of foreign-owned brands. In addition to ethical consumerism and nationalism as barriers to entry into local markets, financial regulations regarding foreign direct investments and national antitrust laws can serve as impediments to mergers or acquisitions. While liberalization of investment laws in Latin America have allowed companies like Nestle, Unilever, and Danone to retain leading food manufacturer statuses, investment laws in Asia are far more restrictive and require participation by local entities and the use of local raw materials. In the U.S., Nestle’s takeover of U.S. Hershey was blocked by the State of Pennsylvania under strong pressure from the local public; in more traditional settings, such mergers may be blocked by the Federal government if concerns regarding industry concentration attach to the acquisition. 44