Unilever

Home and Personal Care Division

Market Overview

Market includes Liquid & powder detergents

Shampoos, body washes, personal care items

Perfumes

Cosmetics

Market Trends

During 1990’s – tight competition in established markets

Economic slowdown in global market

Strong competition to develop new products

Need to control costs and price

Market Trends

Acquisitions or joint ventures to solidify global position

Strong need to be able to satisfy changing consumer preferences

Laundry detergents form the largest component – 50%

Products

Unilever manages over 400 leading brands and just under 250 tail brands. These range from food

to home and personal care.

Food Products

Ben & Jerry’s

Breyers

Country Crock

Hellmann’s

Ragu

Slim Fast

Lipton

Others

Home and Personal Care

Dove

Caress

Pond’s

Snuggle

Wisk

All

Others

Technological Scope

Global integration of SAP software

Standardized corporate computer services – includes intranet

Standardized corporate e-mail

Warehouse management systems using bar code technology

Markets and Distribution

Unilever Divided into 2 Major DivisionsFoods

Home and Personal CareImproved Focus Globally and Regionally

Faster Decision Making

Strengthened Innovation Capacity

Markets and Distribution

Home and Personal Care DivisionsNorth America

Europe

Asia

North Africa

Turkey

Middle East

Latin America

Manufacturing and/or Processing

Operations has 2 divisionsFoodsHome & Personal Care

Employs 265,000 peopleHas 2 parent companies

Unilever NVUnilever PLC

Corporate CentersLondonRotterdam

Manufacturing and/or Processing (con’t)

One of largest users of packaging among consumer goods companies

Works with others to ensure public concerns are understood

Provides the best solutions possible

Trends in manufacturingFewer production centers

More efficient production centers

Manufacturing and/or Processing (con’t)

Pilot project to improve logistics of incoming raw materials to manufacturing locations

Carried out in Warrington, UK

Combine/optimize loads

Seek more direct deliveries

Some plants are making own bottles for liquid detergent

Reduced number of deliveries

Saving around 1,000 trips a month

Manufacturing and/or Processing (con’t)

Uses many forms of transportRailroad

Ships

Trucking

Have minimized the environmental effects of transport

Ensuring vehicles are used efficiently

Shifting goods from road, to rail and water

Industry Attractiveness & Business Strengths

Nature of Competitive RivalryUnilever and P&G globally highly competitiveSales driven by marketing

Bargaining Power of Suppliers/CustomersCarry clout with suppliers due to large consumption of supplier goodsCustomer – available shelf space

Threat of Substitute Products Low consumer differentiation

New EntrantsLarge capital barrier to new entrants

Industry Attractiveness & Business Strengths

Economic FactorsLarge MarketU.S. Market spends discretionary income on personal care products

Financial NormsPersonal care products carry higher profit marginCustomers tend to pay late

Socio PoliticalEnvironmental concerns – recyclable packagingCommunity programs such as Forest Park Clean-Up

Industry Attractiveness & Business Strengths

Cost PositionEconomies of scale due to large consumption of raw materials

Supply chain teams to control costs

Level of DifferentiationRecognition for key brands – Dove, Snuggle

Extremely effective in defending product patents

Response TimeIn U.S. due to competition has had to improve flexibility

Continuing to combine business functions

Industry Attractiveness & Business Strengths

Financial StrengthStrong cash reservesStriving to improve growth of revenues

Human Assets Promotes high level of training and empowermentManufacturing becoming more non-union

Public ApprovalLow recognition in U.S.Highly recognized oversees especially in third world countries

Mission Statement

At Unilever we are dedicated to meeting the everyday needs of people everywhere. We provide washing powder, shampoo and toothpaste, teas, ice cream, oils and spreads for consumers all over the world.

Corporate Philosophy

Unilever's Corporate Purpose states that "to succeed requires the highest standards of corporate behavior towards our employees, consumers and the societies and world in which we live. This is our road to sustainable, profitable growth for our business and long-term value creation for our shareholders and employees."

SWOT Analysis

StrengthsFinance

1) Strong Cash Reserves

2) Global Purchasing

3) International Exchange Rate

SWOT Analysis

StrengthsMarketing1) Extensive product lines make Unilever a

formidable competitor

2) Strong image for well-known brand products

3) Use of creative advertising and promotions on website and commercials

SWOT Analysis

StrengthsOperations1) Two Major Divisions – Foods and Home &

Personal Care

2) #1 in many consumer product categories

3) Well developed supply chain

SWOT Analysis

StrengthsHuman Resources1) High level of training in place for employees

2) Employ approximately 265,000 people

3) Enterprise culture – developing employee to be more customer friendly

SWOT Analysis

StrengthsInformation Systems1. Corporate intranet and e-mail

2. All laptops and desktop machines organized the same (Sunrise hardware program)

3. SAP software used globally

4. Total Business Productivity – each category has website – example Accounting

SWOT Analysis

WeaknessesFinance1. Since it is an overseas stock – not included in

US market analysis2. Business acquisitions affect overall profit

Marketing1. Lack of innovation in several categories has

caused slippage in market share2. Reduced marketing expenditures in television

commercials

SWOT Analysis

WeaknessesOperations1. Innovation time cycles continues to need

improvement

2. Consolidation of facilities is causing production turmoil

SWOT Analysis

WeaknessesHuman Resources1. Expensive labor due to high benefit package

2. Union contracts limit flexibility

Information System1. Global help desk – India & Ireland

2. Deferred updating due to leased hardware

3. Insufficient software package training

SWOT Analysis

OpportunitiesDemographics1. Products appeal to wide range of population

2. Product loyalty through generations

Technology1. Automated manufacturing facilities

2. Already using product innovation needed for front loading washing machines

SWOT Analysis

OpportunitiesEconomy1. Goods are durable in any economic

environment2. Use of international exchange rate

Global1. Largest consumer manufacturer2. Integration of international employees bring

broad cultural and business experience in all processes

SWOT Analysis

OpportunitiesEnvironment1. Maximize recycled packing materials

2. Processes environmentally friendly

3. Products are biodegradable

SWOT Analysis

ThreatsDemographics1. Low product differentiation tends to make

consumers reluctant to change products2. Consumer purchasing base on cost

Technology1. Competitors manufacturing technology

innovations2. Reduction in innovations due to patent

constraints

SWOT Analysis

ThreatsEconomic1. Internal turmoil in third world countries

2. Ventures in developing countries are jointly owned

Global1. Internal business in country may be given

preference

2. Knockoffs

SWOT Analysis

ThreatsEnvironment1. Increased regulations

2. Pressure to reduce utility consumption

Strategic Plan: Increase profitability from 6% to 12% in next 4 year

6%

12%

6% growth

AssumptionsPrime Rate is 4%Available Market Growth is ongoing at 1 – 2% per yearAssume our vendors will accept late paymentsAssume our customers will pay net 30 Existing computer hardware will be able to support new computer softwareOutsourcing of production has acceptable sources

Strategic Plan

Action Plan #1:Reduce costs in production of laundry detergents by 3 – 5% over next 4 years

Action Plan #2:Strengthen market share in personal care products by increasing market share by 10% points

Action Plan #1Information Systems:

Upgrade information systems to achieve improve forecast of sales

Improvement in forecasting should result in a change from 10 week product coverage to 9 week product coverage

Improve schedulingImprovement in raw material inventoryReduces storage time 10 – 15%

These improvements would reduce storage time 10 – 15%Storage equates to $1 to $2/sq ftResults in a 10% savings

Action Plan #1

FinanceChange payment on Accounts Payable from normal 30 day cycle to 45 day cycle

This allows capital to remain invested for a longer period

Example - $1M invested at prime (4%) results in $1643 additional revenue in the extra 15 days

Action Plan #1

MarketingReduce marketing on cash cow brands such as Rinso, All, Final Touch and others

These brands can effectively be marketed in Club Pack stores – examples Cosco, Dollar General, Sam’s

Allows for reallocation of cash cow brand marketing budget to key brands only should result in an additional $8 M available

Action Plan #1Marketing – Anticipated 2004 advertising cost increases

0%

2%

4%

6%

8%

10%

12%

14%

16%

Percentage of Increase

National TVrates

Local TV rate Radio Newspapers

Advertising Media

Action Plan #1

ProductionInitiate process changes to increase utilization of assets and reduces fixed costs

Increase automation to reduce manual labor on production lines – reduction in staffing from 5 per line to 3 per line

Average hourly pay $15/hr plus benefits

Costs savings of $62,400/per worker

Outsourcing of production to reduce 2 production lines per facility

Action Plan #1

ProductionIncrease quality control to reduce over pack – example

On a 50 oz package reduce your over pack from 2% to 1%

Assuming cost of $5/lb

Resulting savings of $3.4 Billion/year

Action Plan #1

Research & DevelopmentReduce cost by alternative formulation

Reduce builder in powder detergents by 2%Cost savings – reduce raw material cost from 0.15/lb to 0.09/lb

Total cost savings - $29 M/year

Human ResourcesProvide additional staff and line worker training

Training with help lines run more efficiently

Pros and Cons

Gives cost reduction desired

By increasing efficiency – makes business more competitive

Focuses marketing on key brands

Sets corporate culture for future growth in this area

Pros and Cons

Disruptive to businessContracts for raw materials need to be renegotiated

R&D diverted from innovation to cost savings emphasis

Negative reaction from laid-off workers

Cost of Reversibility

Many of these changes would not have a cost of reversibility associated with them

If the outsourcing of production needed to be reversed – loss of workers and the need to divert capital back into production facilities would be costly

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Finance

Marketing

Production

R&D

HR

Project Activity Schedule Project Rainbow

Year One Year Two Year Three Year Four

Summary

In order to meet the strategic goal both action plans must be implemented Personal care products have the higher profit margin Upcoming changes in laundry detergent market necessitate reduction in production costs to maintain current profit margin