Download - Ul lipton-presentation v4
K6221 Business IntelligenceUnilever US – Lipton Risks
Management
Sesagiri Raamkumar AravindMane Shivaji Dilip KumarBalasubramaniam DivyaThangavelu Muthu KumaarSelvaraju 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
Source:unilever website
• 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 of their 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 of Ready to Drink
Source - http://www.liptont.com/index.aspxhttp://en.wikipedia.org/wiki/Lipton
Unilever Global Sales(in million euros)
Unilever Divisional Sales
-3
-1
1
3
5
7
9
11
13
15
37000
39000
41000
43000
45000
47000
12.4
8.5
9.6 9.2
Sales vs YOY Growth % vs Net Profit Margin %
250
750
1250
1750
2250
2750
3250
11250
11750
12250
12750
13250
13750
14250
14750
15250
Regional, Divisional and Lipton Sales(in mil Euros)
• 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
79%
3%%4%% 7%% 7%%
Soft Drinks and Alternative Beverages generate retail sales of over 70$ billion
Bottled Water is the fastest growing
beverage category!!!
Lipton has been leading the market by introducing innovative products such as dieting and flavored teas backed up by smart spending on Rainforest Alliance to gain access to non-auctioned tea - Teaconomics
Lipton vs Competitors in Google Trends
Unilever Tea Plantations 10
30.40%
14.40%
24.40%
5.20%
2.00%
2.20%7.90%
2.00%
3.10%
2.20%4.30% 1.90%
UV Plantation- Kenya
UV Plantation- India
UV Plantation- Tanzania
China
Taiwan
Japan
Srilanka
Korea
Nepal
Vietnam
India
Russia
Global Tea Plantations
Major Tea Plantation Countries
SuppliersDistribution Marketing
Shipping
Sales
Warehouse
Manufacturing
Inventory
Research & Development
Quality Assurance
Consumers Endpoints
Information Systems
UV Plantations
Suffolk
Packaging
Manufacturing
Suffolk, Virginia
Lipton Supply ChainTea Supply Chain
Challenges in Tea Industry
• Auctioning & Brokering process is dominated by the big players including Unilever.
• Deforestation in certain countries for growing new Tea plantations.
Due to the lack of global governance initiatives, there is no international platform to bring together major global players to improve the social, environmental and economical conditions of tea producers worldwide.
Strengths
• 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.
• Alliance with Rainforest Organisation.
• Single point of tea distribution in US from Suffolk.
• Strong financial position.
• Increased health consciousness among US population
and health benefits of tea such as herbal and green tea is
another major cause.
• Supply Chain Management.
Weaknesses
• Having too many brand extensions can dilute and
confuse consumer perception and give fresh and new
competitors to seize market share.
• Political unrest in certain plantation country
Opportunities
• Alliance with Pepsi to access massive distribution
network. Presence of big, well known partners drives
demand further.
• Technology advancements in manufacturing.
• Greater awareness of health benefits of tea.
• New varieties of tea drink flavours can be launched
particularly in the Ready to Drink segment.
• Acquisitions of companies in developing markets.
Threats
• Overcrowded and small market with about 200 other
brands which might cause significant demand reduction.
• Presence of other major players such as Coca-Cola and
Nestle leading to tough competition.
• 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
Lipton SWOT Analysis
Unilever
Health Benefits
Rainforest Alliance
Strong cash flow
Market Share
Brand extensions
Geographical distance from Tea Plantation countries
Constantly changing Consumer needs
Alliance with Pepsi
Greater awareness of health benefits of tea
Newer Tea drink flavours
Acquisitions
Overcrowded market resulting in DEMAND
REDUCTION
Presence of other global players
Increasing Tea Prices
Fluctuating Economy
Lipton
SWOT
Analysis
Lipton PEST Analysis
Lipton Risk Map
Generated using
Identified Risk Events/FactorsRank Risk Event Likelihood
Business Impact
1 Difficulty in Investments, expansions in D & E markets with forex fluctuation High High2 Market capture by competitors through product changes and new partnerships Medium Very High3 Change in customer needs and Lack of Process innovation Medium High
4Political unrest(Frequent violence, Political Unrest, mass strikes ,rallies and Uncertain worker movement or activities) in plantation country Medium High
5 Disruption in operational capability of production and distribution Low Very High6 Inflation in labour cotsts Medium Medium7 Stragetic partnerships and alliances breakdown(Pepsico-Lipton) Low Very High8 Corruption and collusion among supply chain and plantation country governments Low High9 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 High11 Decline in beverage consumption during recession periods Low Medium
12Inability to meet company's goal to source the tea in all Lipton tea bags from Rainforest Alliance Certified™ estates by 2015 High Low
13 Competitors influence the brokers in the tea auction market to favour their bid. Low Medium14 Health issues raised by activists based on scientific discoveries Low Medium15 Failure to realize digital advetising ROI Low Low16 Inefficient idea-to-market process lifecycle Low Low17 5-10% of labourers are child labours in Tea Plantations High Very Low
18Exaggerated and misleading promotional campaigns - (MISBRANDING) with unproved and questionable health facts Medium Very Low
19 Unexpected downtime with Sirius(SAP based) and Mountain internal info systems Very Low Medium20 Non-conformance to Sustainability plan Very Low Low
Risk Classification Risk Type Description
Procedure RisksLack of formal procedures, lack of quality
control system
Decision RisksBureaucracy, lack of authority, lack of
decision supportCommunication
RisksCultural differences, language barriers,
misunderstanding
Knowledge RisksLack of formal education, lack of training,
unskilled labor
Supply RisksDisruption of supply, inventory and schedules,
incoming delays
Operational Risks
Failure or breakdown of operations, changes in technology
Demand Risks Variations in demand, changes in technology
Security RisksTheft, counterfeiting, terrorism, piracy,
infrastructure breakdown
Macro RisksEconomic shifts, recession, labor costs,
exchange rates, customs
Policy RisksActions and sanctions of governments, shifts
in legislation
Competition Risks
Uncertainty about competitor's moves and actions
Resource RisksLack of human resources, capital or
technologyUnclassified
Risks Unclassified
Very High
High
Medium
Low
Very Low
Foreign exchange derivatives, Forex hedges, Availing
electronic brokering services
MIS, Data Mining(Forecasting with economic indicators),
What-if Analysis
IMF, World Bank
LIKELIHOOD BUSINESS IMPACT
60% of its total sales resulting from
developing and emerging markets
Difficulty in Investments, expansions in D & E markets with forex
fluctuation
Data Source
Risk Factor
Mitigation
Macro Risks
Risk Event
BI Solution
Groupthink, SWOT framework, R&D up-
scaling
Reflective E-intelligence
Annual reports, Promotional Campaigns,
Press Releases
LIKELIHOOD BUSINESS IMPACT
Market share of Lipton is 26.5% as of
2010
Market capture by competitors through product changes and
new partnerships
Data Source
Risk Factor
Mitigation
Competition Risks/Demand Risks
Risk Event
BI Solution
R&D and conducting customer feedback
Conducting crowdsourcing for finding innovative solutions
Social CRM
Agency and External Consultancy Reports, Customer feedback data
LIKELIHOOD BUSINESS IMPACT
35% of RTD tea sales is of Multi pack category
Change in customer needs and Lack of Process innovation
Data Source
Risk Factor
Mitigation
Demand Risks
Risk Event
BI Solution
Identifying alternative suppliers, increasing onsite audit,
deploying resources in supplier location
DSS-SCM Systems for getting alternate suppliers and EIP for displaying political unrest news
Supplier data(from internal systems),Newsfeeds, Government Reports
LIKELIHOOD BUSINESS IMPACT
60% of tea dust comes from Kenya, Tanzania and India
Political unrest(Frequent violence, mass strikes ,rallies
and Uncertain worker movement or activities) in
plantation country
Data Source
Risk Factor
Mitigation
Supply Risks/Resource Risks
Risk Event
BI Solution
Identifying alternate options at each level in supply chain
Training and Quality Controls
EAI Systems(Tibco and ICAN) and SC RFID data analysis
Audit Reports, System Maintenance Logs
LIKELIHOOD BUSINESS IMPACT
80% of retail price goes to supply chain
Disruption in operational capability
of production and distribution
Data Source
Risk Factor
Mitigation
Operational Risks
Risk Event
BI Solution
Casualization of labor
DSS(What-if Analysis)
Agency Reports, Internal information flow from
workers union
LIKELIHOOD BUSINESS IMPACT
50-60% of production cost goes to labor
wages
Inflation in labor costs
Data Source
Risk Factor
Mitigation
Resource Risks/Macro Risks
Risk Event
BI Solution
M&A
Re-contract with modified terms
Social web mining, ESS, Opinion mining of public
speeches
Enterprise 2.0 data, market intelligence data
LIKELIHOOD BUSINESS IMPACT
More than 1 billion sales of Pepsico Lipton brand in
2011
Strategic partnerships and
alliances breakdown
Data Source
Risk Factor
Mitigation
Operational Risks
Risk Event
BI Solution
Renewal of contracts for finding linkages, external
policing
Content Analytics
Enterprise 2.0 data, SNA data
LIKELIHOOD BUSINESS IMPACT
80% of retail price goes to supply chain
Corruption and collusion among supply chain and
plantation country governments
Data Source
Risk Factor
Mitigation
Procedure Risks
Risk Event
BI Solution
Open house with workers union and standards(CSR and ILO
conventions and national laws)
Benchmarking
Survey Reports
LIKELIHOOD BUSINESS IMPACT
30-40% of tea plantations in Kenya
and Sri Lanka are owned by Unilever and
competitors
Low standards of working and living
conditions(eg: exploitation) in tea
plantations
Data Source
Risk Factor
Mitigation
Resource Risks
Risk Event
BI Solution
Finding alternate suppliers, Crop
insurance
DSS-SCM Systems for getting alternate
suppliers
Weather forecast data and regional
demographics data
LIKELIHOOD BUSINESS IMPACT
Two-thirds of the raw materials
come from agriculture
Uncertainity of weather patterns, water scarcity and natural calamities
Data Source
Risk Factor
Mitigation
Supply Risks/Operational Risks
Risk Event
BI Solution
Revising sales forecast
Seek to improve sales by repackaging and finding alternate
avenues
DSS- What-if Analysis
Agency Reports
LIKELIHOOD BUSINESS IMPACT
33% decline in Commodity Food
and Beverage price index in 2008
Decline in beverage consumption during recession periods
Data Source
Risk Factor
Mitigation
Demand Risks
Risk Event
BI Solution
Setting short term milestones and revising
targets
MIS – Historical Analysis
Internal milestones data
LIKELIHOOD BUSINESS IMPACT
22% of tea plantations are rainforest alliance certified
Inability to meet company's goal to source the tea in all
Lipton tea bags from Rainforest Alliance
Certified™ estates by 2015
Data Source
Risk Factor
Mitigation
Procedure Risks
Risk Event
BI Solution
Cordial relationship with the brokers, setting standards in
auctioning & brokering process
Proactive E-intelligence
Surveillance reports
LIKELIHOOD BUSINESS IMPACT
70% of global tea production is sold through auctions
Competitors influence the brokers in the tea
auction market to favor their bid
Data Source
Risk Factor
Mitigation
Competitor Risks
Risk Event
BI Solution
Collaboration with Universities, M&A, KM
implementation
EAI systems integrating university knowledge
bases and EDW
Internal process data, Intellectual Property
Audit data
LIKELIHOOD BUSINESS IMPACT
2-2.5 % of turnover
invested in R&D
Inefficient idea-to-market
process lifecycle
Data Source
Risk Factor
Mitigation
Knowledge Risks
Risk Event
BI Solution
UV Lipton BI Integrated Solution
Data Information Knowledge Action
Logistics External Agencies
Customers Suppliers
Competitors & Market
Product&
Marketing
ERP CRM & SCM
Other IS
Central Datawarehouse
Data
Inte
grati
on
Met
adat
a M
anag
emen
t
Enterprise Application Integration(EAI)
ETL
Datamarts & ODS
Non-stop Operations Scability Performance Security
End User Analysis
Operational Planning
Desktop
Handheld computing devices
Cloud based IS
Mobile devices
Enterprise Information Portal(EIP)
Alerts & Monitoring
Financial Reporting
Generic Analysis
Dashboards What-If Analysis
Rolling Forecast Goal Setting
Predictive Analytics
Bench-marking
MIS
DSS
ESS
Scorecards
Collaborative Decision Making
“A man without tea in him is incapable of
understanding truth and beauty”
Okakura Kakuzo, The Book of Tea (1906)
Q&AThank You