The Association of Business Executives International Business Case Study Unilever Afternoon, 4 December 2012 This is an open-book examination and you may consult any previously prepared written material or texts during the examination. Only answers that are written during the examination in the answer book supplied by the examination centre will be marked. 6IBCS1212 © ABE 2012 Notes l As in real life, anomalies may be found in this Case Study. Please simply state your assumptions where necessary when answering questions.
ABE is not in a position to answer queries on Case data. Candidates are tested on their overall understanding of the Case and its key issues, not on minor details. There are no catch questions or hidden agendas. After the publication of the Case Study, subsequent developments may occur. The examination is based on the published Case Study, and students who do not mention such developments will not be penalised. However, students may consider such developments in their answers if they wish. l IBCS1212 2 Unilever Case Study Introduction Unilever is a British-Dutch multinational fast-moving consumer goods (FMCG) company. Its products include foods, beverages, household cleaning agents and personal care products. It is the world’s third-largest FMCG company measured by revenues (after Procter & Gamble and Nestle) and the world’s largest maker of ice cream. Unilever is a dual-listed company consisting of Unilever N. V. in Rotterdam, Netherlands and Unilever PLC in London, United Kingdom.
Both Unilever companies have the same directors and they operate as a single business. As of December 2011, it was the 18th largest company on the London Stock Exchange, and the combined market capitalisation was ? 51 billion. Unilever is organised into four strategic business units (SBUs), as follows: l Savoury, Dressings and Spreads – including soups, bouillons (stock cubes), sauces, snacks, mayonnaise, salad dressings, margarines and spreads. Ice Cream and Beverages – ice cream, tea, weight management (slimming) products and nutritionally enhanced staple foods.
Personal Care – skin and hair care, toiletries, deodorants and antiperspirants, and oral care products (toothpastes). Home Care – laundry washing powders and detergents, soaps and other household cleaning products. Unilever Sales by Market Sector l l l Billions of Euros (€) Savoury, Dressing and Spreads Ice Cream and Beverages Personal Care Home Care Total (Source: Unilever Annual Reports) 2008 14. 2 7. 7 11. 4 7. 2 40. 5 2009 13. 3 7. 8 11. 8 6. 9 39. 8 2010 14. 2 8. 6 13. 8 7. 7 44. 3 2011 14. 0 8. 8 15. 5 8. 2 46. 5 6IBCS1212 3 [Turn over
Unilever Sales by Region Billions of Euros (€) Netherlands/ United Kingdom Rest of Western Europe Total Western Europe USA Brazil Rest of Americas Total Americas Asia, Africa, Central & Eastern Europe Total (Source: Unilever Annual Reports) Of particular note is the company’s interest in India, which is a 52% controlling stake in Hindustan Unilever Ltd (HUL) (See Appendix 1). Like Nestle India, Hindustan Unilever understands the need to get close to the customer. Its ‘Project Shakti’ recruited 45,000 poor rural women as sales agents, turning them into micro entrepreneurs.
These women perform a useful public service by teaching their neighbours about basic nutrition and hygiene. By a happy coincidence, lessons about the importance of hand washing stimulate demand for Unilever’s soap. Unilever has the advantage that people’s preference for soap and shampoo varies much less from place to place than their taste in food. The firm thus spends less time than Nestle studying local culinary habits, and more time trying to work out the right package sizes and prices – Indian consumers are highly price-sensitive.
Paul Polman, Unilever’s chief executive, recently decided to put the bulk of the company’s resources behind growth in its more commoditised product lines. Company History Unilever was founded in 1930 by the amalgamation of the operations of British soapmaker Lever Brothers with a Dutch company, Margarine Unie, to form the first modern multinational company. It made sound commercial sense, as palm oil was a major raw material for both margarines and soaps. Therefore, palm oil could be imported more efficiently in larger quantities leading to economies of scale.
From the 1930s the Unilever business grew and new ventures were launched in Africa and Latin America. By 1980 soap and margarine contributed just 40% of profits, compared with an original 90% in 1930. In 1984 the company bought the tea business Brooke Bond, the maker of PG Tips, a major brand. In 1987 Unilever strengthened its position in the world skin care market by acquiring the US company, Chesebrough-Ponds, with important brand names such as Pond’s Creams, Aqua-Net, Cutex Nail Polish, and Vaseline. In 1989 Unilever bought Calvin Klein Cosmetics.
In 1996 Unilever purchased Helene Curtis Industries, giving the company a strong presence in the United States shampoo and deodorant market. The purchase brought Unilever the Suave and Finesse hair-care product brands and Degree deodorant brand. The company has operating companies and factories worldwide. It has research laboratories in the United Kingdom, the Netherlands, the United States, and China. The US division carried the Lever Brothers name until the 1990s, when it adopted that of the parent company.
The company promotes sustainability and started a sustainable agriculture programme in 1998. 6IBCS1212 2008 3. 5 9. 3 12. 8 6. 6 2. 7 3. 9 14. 5 40. 5 2009 3. 4 8. 7 12. 1 6. 3 2. 8 3. 7 14. 9 39. 8 2010 3. 5 8. 5 12. 0 6. 7 3. 5 4. 4 17. 7 44. 3 2011 n/a n/a 12. 3 n/a n/a n/a 15. 3 18. 9 46. 5 4 In 2000 the company acquired the American business Best Foods, strengthening its presence in North America and extending its portfolio of food brands, in particular Hellmann’s mayonnaise. In April 2000 it bought the iconic ice cream maker Ben and Jerry’s and the SlimFast brand.
In 2009, Unilever acquired the personal care business of Sara Lee Corporation, with its leading brands such as Radox, Badedas and Duschdas, strengthening the company’s category leadership in Skin Cleansing and Deodorants. In 2010, Unilever purchased Alberto Culver, the maker of personal care and household products such as Simple, VO5, Tresemme and Mrs. Dash, for US$3. 7 billion. In March 2011 Unilever announced that it had entered into an agreement to sell the global Sanex business to Colgate-Palmolive for €672m, and for Unilever to acquire Colgate-Palmolive’s laundry detergent brands (Fab, Lavomatic and Vel) in Colombia for US$215m.
In August, Unilever announced that it would sell VO5 and the Rave brand in the USA to Brynwood Partners VI L. P. In October 2011 Unilever acquired 82% of leading Russian beauty company Kalina. Kalina’s successful brands will enhance Unilever’s presence in this attractive emerging market, and will strengthen the Personal Care portfolio, creating a leading position in skin care in Russia. Human Relations Unilever, along with many multinationals, has greatly reduced its global workforce. Between 2000 and 2008 Unilever reduced global workforce numbers by 41%, from 295,000 to 174,000. The number of employees at the start of 2012 was 171,000.
The United Kingdom part of the business – Lever – had a heritage of social awareness, in the same way as Cadbury. Their main manufacturing site of Port Sunlight had a good standard of housing for its workers and the owner and founder of the business, Lord Leverhulme, treated his workers well. This ethos has carried on into the current organisation but has brought a major problem – that of pension provision. Like many large organisations, Unilever has had to change its pension scheme from a now very costly pension based upon a worker’s final pay to one that is based on average earnings.
The key reason for having to do this is that people are now living longer in retirement (up to twice as long) and the pension funds cannot sustain the level of payments. This has meant that many large companies have growing deficits on their pension funds. Attempts to change the pension plan for current workers have led to resistance in the form of industrial action and Unilever workers have taken part in high profile strike action, which has greatly affected the production of its key brands.
This has so far been restricted to the UK but could spread to other countries. Unilever’s highest executive body is the Unilever Leadership Executive, which is led by the Group Chief Executive and contains representation from many countries, not only the UK and the Netherlands. The company prides itself upon being truly global and it shows this by actions such as holding meetings of the Executive in different countries. The number of women in senior positions has risen from 23% in 2007 to 28% in 2011. 6IBCS1212 5 [Turn over
Financial Performance As the following Income statement shows, there has been sales growth in recent years but this is mostly accounted for by marked increases in raw material prices and has impacted upon the net profit Consolidated Income Statement Millions of Euros (€) Sales Gross Profit Distribution and Administration costs Research and Development Operating Profit Net finance costs Income from non-current investments Profit before taxation Taxation Net Profit Earnings per share (€) 2009 39,823 16,641 (10,730) (891) 5,020 (593) 489 4,916 (1,257) 3,659 1. 1 Consolidated Balance Sheet Millions of Euros (€) Non-current assets Current Assets Total Assets Current liabilities Net Current assets Non-current liabilities Shareholders’ equity Non-controlling interests Total equity Total capital employed (Source: Unilever Annual Reports) 2009 26,205 10,811 37,016 (11,599) 25,417 12,881 12,065 471 12,536 25,417 2010 28,683 12,484 41,167 (13,606) 27,561 12,483 14,485 593 15,078 27,561 2011 33,221 14,291 47,512 (17,929) 29,583 14,662 14,293 628 14,921 29,583 2010 44,262 18,372 (11,105) (928) 6,339 (394) 187 6,132 (1,534) 4,598 1. 1 2011 46,467 18,537 (11,095) (1,009) 6,433 (377) 189 6,245 (1,622) 4,623 1. 46 6IBCS1212 6 Marketing Aspects Competitors Unilever’s largest international competitors are Procter & Gamble and Nestle. It also faces competition in local markets or with specific product ranges from Beiersdorf (Germany), Henkel (Germany), Reckitt Benckiser (UK), and S. C. Johnson (USA & UK). Procter & Gamble is considered to be Unilever’s main competitor, particularly in home care and personal care. In 2010 it employed 129,000 people worldwide and in 2011 had sales revenues of US$82. 5 billion with a profit of US$11. 8 billion.
Nestle is the world’s largest FMCG company with over 281,000 employees working in 443 locations in 81 countries, with distribution of its products in most countries. In 2010 its sales revenue was over US$119 billion and its net profit was approximately US$16 billion. Its brands such as Maggi compete with some of Unilever’s food brands in the savoury, dressings and spreads category and it has a strong market presence in ice cream. The Nestle coffee brands compete indirectly with Unilever’s tea business. Beiersdorf is a family-owned business with around 18,000 employees. In 2011 its sales revenue was €5. 6 billion with a profit of €259 million.
Its main brand is the ubiquitous Nivea, which has undergone ‘brand stretching’ from being a skin cream into other related personal care products such as shampoos and deodorants. It is present in over 90 countries. Henkel competes strongly in the home care sector with its brands such as Schwarzkopf, Natural Hair and Fab. Its products are sold in over 50 countries, notably the USA, Mexico, Brazil, India, South Africa, France, Germany, the UK and Australia. In 2010 it had sales revenue of €15. 09 billion with profits of €11. 8 billion. S. C. Johnson is also a family-owned company with around 12,000 employees.
It has a range of strong household products some of which compete directly with Unilever brands in 110 countries. In 2010, it had sales revenues of US$8. 75 billion with profits estimated to be US$2 million. Reckitt Benckiser is the world’s largest producer of household cleaning products and a major producer of consumer healthcare and personal products. Its brands include Dettol, Strepsils, Veet, Clearasil, Cillit Bang and Vanish. It has direct operations in over 60 countries, employing around 27,000 workers. Its products are sold in over 180 countries. In 2010 its sales were ? 8,453 million with a net profit of ? 1,570 million.
Pricing In 2010 the Chinese regulatory authorities fined Unilever US$308,000 (? 188,000) for warning it might increase prices on some of its products. The National Development and Reform Commission (NDRC) said that comments by Unilever about possible price rises had created “market disorder”. Both China and Unilever are struggling with higher commodity prices, including higher energy and food costs. The company told Chinese media some months ago that prices would have to rise, but Chinese officials said this had provoked panic buying. The NDRC also said the warning had “intensified inflationary expectations among consumers”.
China, like other national governments, is battling to contain inflation, which is at a three-year high in the country. Unilever, and its rivals, including Procter & Gamble and Kraft, have all warned on the need for prices to increase. In April 2011, Unilever was fined 104 million euros by the European Commission for establishing a price-fixing cartel in Europe along with P&G and Henkel. P&G were fined 211. 2 million euros. Though the fine was set higher at first, it was reduced by 10% after Unilever and P&G admitted running the cartel. As the provider of the tip-off leading to investigations, Henkel was not fined. 6IBCS1212 7 [Turn over
Brands Unilever owns more than 400 brands, with its 25 largest brands accounting for over 70% of total sales. It has further decided to focus its resources on 13 ‘billion-Euro brands’, each of which has annual sales in excess of €1 billion. Dove became the first €3 billion Personal Care brand in 2011. Unilever organises its brands into two main categories; Food & Beverages and Home & Personal Care. The strategy tends to be based upon stand-alone brands with globalised brands wherever possible. In some instances this is not possible, often for cultural reasons. Thus there are brand variants such as Axe/Lynx, Rexona/Sure, and Flora/Becel.
Additionally, with regard to the key ice cream market there are many national brand variants within the umbrella brand of Heartland. (See Appendix 2 for a list of some of the current global brands). In the same way as other FMCG producers, Unilever relies heavily upon the co-operation and support of the major retailers such as Walmart, Carrefour and Tesco. To do this they must ensure that they can provide good selling and profitable brands with continuous advertising and promotion (A & P) spending and investment in innovation to both improve the products and to introduce profitable new products.
Problems with the branding approach 1. Creating and maintaining a brand can be very costly and inevitably means that the products are priced at a premium compared to own labels and producer brands. The price discrepancy is more significant during economic recessions, particularly when there is inflation coupled with income restraint such as currently exists in Europe and many developing countries such as Brazil and India. Consumers look to save money and start buying cheaper alternatives to the advertised brands.
Hard discounter retailers such as Lidl are starting to highlight these differences with so-called ‘knocking’ advertising, where major brands are shown in direct contrast to lower-priced products highlighting the price differences and stressing the benefits of the lower-priced alternatives. One of the brands featured is Hellmann’s Mayonnaise. 2. Global brands such as Unilever’s have been liable to be copied by counterfeiters who produce inferior copies that are sold by unscrupulous traders. (See Appendix 3. It should be noted that as well as actual products and brands being copied, promotional coupons that offer either free products or money-off the purchase price are forged as well. The proliferation of brands can cause problems when consumer demand declines and expenses such as advertising and promotion (A & P) have to be reduced. In the past Unilever has taken a corporate decision to reduce the number of advertised brands to concentrate on their major sellers. This has led to smaller and more focused competitors gaining profitable market share.
Brand-focused organisations such as Unilever have to take great care to protect the integrity and reputation of their brand names as they can be subject to consumer backlash, as occurred with Persil, a Unilever brand, in 1994. (See Appendix 4) 3. 4. Advertising Unilever is one of the largest media buyers in the world, and spent around €6 billion (US$8 billion) on advertising and promotion in 2010. In 2011 this further increased by €153 million. The company policy regarding advertising and promotion is to allocate expenditure as a percentage of sales revenue.
The advertisements feature the iconic Unilever company logo which itself is composed of 26 parts, each one representing one of the company’s sub-brands or its corporate values. 6IBCS1212 8 Unilever has produced many notable advertising campaigns, including: l Lynx/Axe click advert with singer and actor Nick Lachey in the US and famous film star Ben Affleck in the rest of the world. PG Tips with the Monkey and Al. Knorr Chinese Soup, ‘Just add one egg! ’ CLEAR Men Ice Cool Menthol with the Portuguese footballer Cristiano Ronaldo. CLEAR Complete Soft Care with the Indonesian female actress Sandra Dewi.
CLEAR Soft & Shiny with the Indonesian female singer and actress Sherina Munaf SUNSILK Clean & Fresh with the Indonesian female singer Lala Karmela l l l l l l Unilever has always been innovative in its advertising and has fully embraced technology such as the Internet with, for example, its use of Facebook. In 2008 the company was honoured at the 59th Annual Technological & Engineering Emmy Awards for ‘Outstanding Achievement in Advanced Media Technology for Creation and Distribution of Interactive Commercial Advertising Delivered through Digital Set Top Boxes’ with reference to the Axe brand.
Whilst the use of the Internet is generally without political interference it is thought that the level of government regulation may increase, as shown by recent high profile examples such as copyright issues. Environmental Aspects In May 2007 Unilever became the first tea producer to commit to sourcing all its tea in a sustainable manner with The Rainforest Alliance, an international environmental Non-Governmental Organisation (NGO), certifying the company’s tea estates. Lipton and PG Tips will be the first brands to contain certified tea.
The company aimed to have all Lipton Yellow Label and PG Tips tea bags sold in Western Europe certified by 2010 and all Lipton tea bags sold globally certified by 2015. Palm oil – as mentioned earlier palm oil is a key raw material of Unilever’s Soap and Edible Oils business. In 2008 Greenpeace UK criticised the company for buying palm oil from suppliers that are damaging Indonesia’s rainforests and thus causing deforestation. Unilever, as a founding member of the Roundtable on Sustainable Palm Oil (RSPO), responded by publicising its plan to obtain all of its palm oil from sources that are certified as sustainable by 2015.
In Cote d’Ivoire, one of Unilever’s palm oil suppliers was accused of clearing forest for plantations, an activity that threatened the existence of a species of monkey. Unilever intervened to halt the clearances pending the results of an environmental assessment. In July 2010, the company announced that it had secured enough GreenPalm certificates of sustainable palm oil to cover the requirements of its European, Australian, and New Zealand business. GreenPalm is a certificate-trading programme, endorsed by the RSPO, which is designed to tackle the environmental and social problems created by the production of palm oil.
In addition to these specific initiatives, Unilever launched the Sustainable Living Plan (SLP) on November 15, 2010 in the UK, Netherlands, United States and India simultaneously. (See Appendix 5) 6IBCS1212 9 [Turn over The plan has three major goals, which Unilever aims to achieve by 2020: l To help more than one billion people improve their health and well-being To halve the environmental impact of their products To source 100% of their agricultural raw materials in a sustainable way l l The plan also sets out over 50 social, economic and environmental targets globally which are based upon Project Shakti, which was initiated by HUL. See Appendix 1) Future Strategies At the beginning of 2012 the board announced some key strategies. In terms of markets it identified a group of key markets – the so-called MIST nations – as a priority target. The MIST nations comprise the following countries – Mexico, Indonesia, South Korea, and Turkey. Economically they each account for over 1% of the world’s GDP (See Appendix 6). The challenge for Unilever will be to successfully identify the Pestle factors that are important in these countries.
This is in addition to the focus on the BRIC (Brazil, Russia, India and China) countries, which all have rapidly expanding middle classes who typically purchase branded products, in part symbolic of their increased wealth. The board also has recently reconfirmed that it was their intention to ensure that the aims of the SLP will be achieved as a key priority and the company would consolidate its CSR activities following on from the initial announcement of the SLP. The company also recognised that it has to increase its sales to compensate for reduced profit margins due to increases in costs.
There are opportunities to extend the distribution of existing products into so-called ‘white space’ countries where the company has a presence, but not with every brand, and to take advantage of new acquisitions to enter new markets, such as the Kalina acquisition in Russia. They can further increase the level of innovation, leading to more new products, which can be made very profitable within a few years. The option to move into new product categories, based upon consumers’ wider needs, can also be considered.
The board has already stated that it intends to re-shape its product portfolio through positive growth via mergers and acquisitions and put an end to several years of being a net disposer of businesses. With regard to their retail customers, Unilever must continuously seek ways of enhancing the relationships to avoid their brands losing distribution. In the absence of suitable distribution channels, initiatives such as Project Shatki and Perfect Stores (See Appendix 1) may need to be considered in some new developing countries. Unilever, as a global organisation, is always eeking ways to be cost-efficient and this means that there is an on-going need to review their production capabilities. However in the case of recently announced closures in Wales in the UK this can lead to adverse reactions. (See Appendix 7) 6IBCS1212 10 APPENDIX 1 Hindustan Unilever Hindustan Unilever Limited (HUL) is India’s largest FMCG company. It is owned by the British-Dutch company Unilever, which controls a 52% majority stake in HUL. HUL was formed in 1933 as Lever Brothers India Limited and came into being in 1956 as Hindustan Lever Limited through a merger of Lever Brothers, Hindustan Vanaspati Mfg.
Co. Ltd. and United Traders Ltd. It is headquartered in Mumbai and has over 16,500 employees and contributes to indirect employment of over 65,000 people. The company was renamed in June 2007 as ‘Hindustan Unilever Limited’. Lever Brothers started its actual operations in India in the summer of 1888, when crates full of Sunlight soap bars, embossed with the words ‘Made in England by Lever Brothers’ were imported. Hindustan Unilever’s distribution covers over 2 million retail outlets across India directly and its products are available in over 6. 4 million outlets in the country.
HUL is the market leader in Indian consumer products with presence in over 20 consumer categories such as soaps, tea, detergents and shampoos amongst others with over 700 million Indian consumers using its products. Leadership HUL has produced many business leaders for corporate India, including Harish Manwani, the non-executive chairman of HUL and currently the Chief Operating Officer of Unilever. He is also a member of the Unilever Leadership Executive team (ULE), which comprises the company’s top management and is responsible for managing Unilever’s profit and loss, and delivering growth across its regions, categories and functions.
Nitin Paranjpe has been the Managing Director and Chief Executive Officer of HUL since April 2008. HUL is one of the country’s largest exporters and it has been recognised as a Golden Super Star Trading House by the Government of India. HUL is a very socially aware company and has many initiatives aimed at improving society. One of these is Project Shakti. Project Shakti is a sales and distributive initiative which recruits village women as sales persons called Shakti Amma. HUL trains them to communicate and sell the HUL products in villages.
The idea is to be able to reach those villages that do not have good road connectivity and where the penetration of media is poor. The Shakti Entrepreneur (SE) programme recognises that while micro-credit, the lending of small amounts to people who otherwise may not qualify for loans but need relatively small capital to start their own business, does play a key role in alleviating poverty, its ability to do so depends on the availability of investment opportunities. Shakti contributes by providing profitable opportunities for rural women.
With micro-credit, rural women become Shakti entrepreneurs: direct-to-home distributors in rural markets. This micro-enterprise offers low risks and high returns. The products distributed are some of the country’s most trusted brands of consumer goods, and include a range of mass-market products especially relevant to rural consumers. Moreover, HUL invests its resources in training the entrepreneurs, helping them become confident, business-savvy professionals capable of running their own enterprise. 6IBCS1212 11 Turn over Marketing Initiatives HUL also launched a multi-brand rural marketing initiative called Khushiyon Ki Doli in 2010 in three states in central India. Through this initiative more than 10 million consumers were contacted directly in more than 28,000 villages across these three states. Through this initiative, the company also reached out to 170,000 retailers in these villages. Various HUL personal care and home care brands have participated in this initiative including Surf, Excel, Sunsilk, Vim, and Lifebuoy.
A third major initiative called the ‘Perfect Stores’ initiative was launched by HUL in May 2010 with the aim to improve the availability and visibility of its products in retail stores across the country. Four thousand HUL employees from across functions launched the initiative through ‘Project Bushfire’ and created 16,000 ‘Perfect Stores’ in 130 towns in India in a span of 6 days. The employees not only laid out various products on the stores’ shelves but also dusted them, thereby transforming the whole look of the stores. Source: Hindustan Unilever Limited) 6IBCS1212 12 APPENDIX 2 In 2012 Unilever’s range of global brands included: l Aviance Axe/Lynx Ben and Jerry’s Blue Band Carte D’Or Dove Flora/Becel Hellmann’s Knorr Lifebuoy Lipton’s Tea Lux/Radox Magnum Omo/Surf Persil PG Tips Rexona/Sure Simple Stork Sunsilk Toni & Guy TRESemme VO5 Wish-Bone l l l l l l l l l l l l l l l l l l l l l l l 6IBCS1212 13 [Turn over APPENDIX 3 Fake Lipton Tea, Nescafe Leak into EU, Hurting Unilever, Nestle By Stephanie Bodoni, Hugo Miller and Naween Mangi Published: Friday, June 5, 2007 by Bloomberg ANTWERP Belgium – Chris De Buysscher, a Belgian customs official, intercepted a shipment of , 20,000 kilograms of fake Lipton tea from China last year. De Buysscher, head of the port of Antwerp’s counterfeit-hunting squad, is on the frontline of a new battle in the war against knockoffs: fake brand-name items including tea, shampoo and soap. Colgate-Palmolive warned American consumers Thursday that counterfeit toothpaste that may contain a chemical used in antifreeze was found at stores in four U. S. states.
Fraudulent products hurt sales of companies such as Nestle, Procter & Gamble and Unilever, the owner of Lipton tea, and may pose health risks. Multinational manufacturers in general lose about 10 percent of sales to counterfeiting, said Guy Sebban, Secretary General of the International Chamber of Commerce. That would amount to about $20 billion a year for Nestle, Procter & Gamble and Unilever combined, though none of them would confirm it. “It’s gone from being a local problem to a multinational problem,” said Richard Heath, Unilever’s global anti-counterfeiting counsel, who is based in London. All the investment the counterfeiters make is in the packaging and not what goes inside, and that’s the worrying thing. ” In 2006, European Union customs officers seized 253 million fake products at the external borders of the bloc, up from 85 million in 2002. Seizures of personal-care products and perfume rose to 1. 6 million items from 112,132 in 2002. Officers caught 1. 2 million food and beverage products, up from 841,000. “The damage to companies is ‘immeasurable’ because seizures represent a tiny portion of counterfeit goods and lost sales are only one part of the equation”, said Bryan Roberts, an analyst at Planet Retail in London. Any attempt to quantify it seriously will underestimate the extent of the problem,” he said. “But obviously they will suffer in terms of the reputation of their brands. ” Colgate-Palmolive, the world’s biggest toothpaste maker, said it was cooperating with the U. S. Food and Drug Administration to identify the makers of the toothpaste falsely packaged as Colgate. It was discovered at discount stores in New York, New Jersey, Maryland and Pennsylvania, “and may contain the toxic chemical diethylene glycol”, the company, based in New York, said. An influx of bogus consumer goods began raising concerns in Europe in late 2003”, said Christophe Zimmermann, anti-counterfeiting chief at the World Customs Organization. “It’s a problem that becomes worse every year as they’ve taken on industrial proportions,” he said, citing seizures of Nestle’s Nescafe coffee and Maggi stock cubes. De Buysscher displays some of the confiscated goods in his office. They include phoney Gillette Mach 3 razors and Head & Shoulders shampoo, both P&G brands, and Colgate toothpaste. Ten years ago, it was luxury products,” he said, looking out the window at the 30-kilometer-long, or 19-mile-long, port. “Now it’s consumer goods, and the number is increasing every year. ” The boom is being driven by the Internet, which makes it easier for the counterfeiters to find customers, and the development of cheap, high-quality printing equipment that allows criminals to mass-produce packaging, said Heath of Unilever. Rising trade with Asia, where trademark rules are less rigorously enforced, is also contributing to the trend. Those changes, combined with a lack of consumer awareness, make counterfeiting household goods less risky than targeting luxury handbags and watches”, De Buysscher said. 6IBCS1212 14 The potential danger of counterfeit food was driven home in 2004, when at least 13 babies in China died after they were fed fake infant formula that had no nutritional value, the official Chinese press service, Xinhua, reported at the time. Nestle, which was not involved in the China incident, says that fakes risk hurting its reputation. Companies are increasing their efforts to fight counterfeiters.
Unilever’s strategy is to stop the goods before they enter Europe or North America, where it is trickier to track them down, Heath said. The company registers brands locally and depends on salespeople and distributors in Asia to gather evidence of fakes. PepsiCo, based in Purchase, New York, works with national authorities to protect its brands, a company spokesman, Dick Detwiler, said. Red Bull, maker of the world’s most popular energy drink, has a global network of samplers who seek out fake, imitation brands, said Jennifer Powers, global trademark counsel for the Austrian company.
Illicit use of Red Bull’s trademark colours and logo is on the rise, she said. On Feb. 5 2007, French customs officers at Le Havre seized 7,776 soft-drink cans labelled Gold Cow and stamped with the Red Bull logo. The European Union is trying to stem the tide. The European Parliament, on April 25 2007, backed a law that prescribes four-year prison sentences and fines of €300,000, or $399,000, for dealing in counterfeit goods that endanger consumers. Unilever officials in Pakistan have witnessed how sophisticated some counterfeiters have become.
Sometimes the packaging is so good that company officials struggle to determine whether a product is genuine, said Amar Naseer, Unilever’s legal counsel in Karachi. A factory in the eastern trading town of Multan had 20 people making at least a ton of counterfeit tea a day, he said, often containing sawdust or dyed wood chips. At Boulton Market in Karachi, a warren of dirt alleys, a young vendor was selling soap with packing resembling that of Unilever’s Dove brand, four bars for 70 rupees, or $1. 16, seemingly a bargain compared with a retail price of 115 rupees for one bar. Source: www. bloomberg. com) 6IBCS1212 15 [Turn over APPENDIX 4 The laundry products (washing powder) market has always been a fiercely contested battlefield, with Unilever’s Persil, Surf and Comfort brands vying against Procter and Gamble’s (P & G), Ariel, Daz, Bold and Fairy. Up until the early 1990s, Ariel had always been marketed to highlight its scientific, stain-busting properties while Persil was presented as the first choice for devoted mothers who cared. But Persil’s dominance was waning and Unilever set about developing a new product to attack Ariel’s tough-on-stains territory.
Persil Power contained a special manganese ingredient, called ‘the accelerator’. Its main competitor, P&G, warned Unilever the new formula was too powerful for general use and could harm clothes. In spite of this Unilever went ahead and launched Persil Power in 1994. Within days the press were printing photos sent out by P&G, of boxer shorts and T-shirts riddled with holes. Persil’s owners started to be bombarded with ragged garments sent in by outraged customers. Unilever had to write off ? 57m worth of stock and analysts estimate the debacle cost them as much as ? 250m.
The company rushed to recover the situation by releasing a new softer formula, New Generation Persil, without the manganese accelerator. Persil regained its position as market leader four years later with Persil Tablets, which showed that Unilever had strong innovations (Source: www. bbc. co. uk/news – 8 May 2011) 6IBCS1212 16 APPENDIX 5 Consumer products giant Unilever has unveiled a ‘new business model’ putting sustainability at the heart of its global operations. It pledged to halve the environmental impact of its products while doubling sales over the next 10 years.
Chief executive Paul Polman said the new model was “the only way to do business long term”. The company said it would produce an annual report on its progress towards achieving these goals. Consumer demands Unilever, which makes a number of the UK’s most popular brands, such as Persil, Dove, Flora, PG Tips and Ben & Jerry’s, made three overarching commitments to achieve by 2020: l to cut by 50% the environmental impact of its products in terms of water, waste and greenhouse gases to source 100% of its agricultural supplies from sustainable sources to improve the health and well-being of one billion people across the world. l “There is a compelling case for sustainable growth – retailers and consumers demand it and it saves us money. ” It outlined a number of ways in which it would deliver on these commitments, including doubling its use of renewable energy to 40% of total energy use; reducing its water consumption by 65% on 1995 levels; reducing waste sent for disposal by 70% on 1995 levels and reducing levels of salt, fat and sugar in its food products. The company dmitted it would not be easy to achieve these goals, but said they could be hit with the help of Non-Governmental Organisations (NGOs), governments and suppliers. Value creation Speaking at the launch of the company’s Sustainable Living Plan at Unilever’s headquarters in London, Mr Polman said there was “no conflict between sustainable consumption and business growth”. “Quite the opposite, in fact. There is a compelling case for sustainable growth – retailers and consumers demand it and it saves us money. Asked how the company would sell this new model to potentially sceptical City investors only interested in the bottom line, Mr Polman said: “I’m not interested whether (the plan) brings competitive advantage. This is about long-term value creation. It’s the only way to do business long term. ” Jonathon Porritt, environmental campaigner and an adviser to Unilever, said that businesses needed to make money out of becoming more environmentally responsible. “There is no way of arriving at a sustainable world that does not involve businesses making money,” he said.
Rising profits A number of leading multinational companies have made commitments to reduce their environmental impact. For example, the world’s biggest retailer Wal-Mart has introduced sustainability criteria as part of its official product-sourcing process. However, few major companies have made such concrete commitments on environmental policy as Unilever, or been so vocal in championing the importance of sustainability to long-term growth. Source: Unilever Press Office. 6IBCS1212 17 [Turn over
APPENDIX 6 The MIST Countries In February 2011, Jim O’Neill, an economist and the chairman of Goldman Sachs, identified a new phase of global economic development centred around the possible alignment of Mexico, Indonesia, South Korea and Turkey. These are known collectively as the MIST nations and it is thought that their global importance will in time rival that of the so-called BRIC nations. The four MIST countries are all members of the G20 group and each have GDPs of over 1% of the global economy.
Individually they have different PESTLE factors but overall they are important to global corporations such as Unilever. Since 2000 Mexico has shown significant economic growth with its inflation rate now being considered within acceptable limits. It is now a member of the North American Free Trade Association (NAFTA) and this has greatly helped its economic development. Mexico’s proximity to the United States and its links with Central and South American markets as well as its Hispanic culture has led to it being an ideal location for strategic investment by multinational corporations.
Politically, it is expected that future governments will encourage private investment in state-run industries, notably oil, and will also carry out structural changes aimed at liberalising the labour market and maximising tax revenues. It has a population of over 112 million and is the 11th most populous country in the world. According to Forbes magazine the richest man in the world is a Mexican – Carlos Slim Helu, who earned his wealth from the telecommunications industry. Indonesia, with a population of over 250 million is the world’s most populous Muslim nation.
The major strengths of Indonesia are its reserves of natural resources, an expanding middle class and its geo-political links within the region. It has a leading role in the free trade organisation the Association of South East Nations (ASEAN) that collectively has a population of over 750 million. In 2015 ASEAN will become even more closely integrated with the inauguration of the ASEAN Economic Community (AEC). According to Reuters, with the creation of the AEC, Indonesia will become a significant market for both natural and human resources.
South Korea is considered by many multinational corporations as the new Japan. It has the lowest unemployment rate of the G20 nations and its population of over 48 million has one of the highest purchasing power per capita in the world. Its labour force is renowned for its industriousness. The South Korean Samsung Corporation accounts for over one fifth of the country’s exports and is rapidly becoming a global leader in the mobile telecommunications and computing market. Turkey is a democratic republic with a diverse cultural heritage. It has a population of 74 million.
Although predominantly in Asia, Turkey has become increasingly integrated with the West through membership of organisations such as NATO, the G20 and the OECD. Turkey is also an associate member of the European Economic Community and is currently applying to become a full member of the European Union. Turkey also has close cultural, political, economic and industrial relations with countries in the Middle East and Asia. Turkey’s developing economy and diplomatic initiatives have led to its recognition as a growing regional power in the Middle East. Turkey has the world’s 17th largest GDP.
As well as having a strong manufacturing base (for example, it produced 1,147,110 motor vehicles in 2008, making it the 15th largest producer in the world), Turkey has a strong tourist sector which has experienced rapid growth in the last twenty years and which continues to constitute an important part of the economy. In 2008 there were 31 million visitors to the country, who contributed $22 billion to Turkey’s revenues. Other key sectors of the Turkish economy are banking, construction, home appliances, electronics, textiles, oil refining, petrochemical products, food, mining, iron and steel and shipbuilding. Source: Various Sources) 6IBCS1212 18 APPENDIX 7 Community leaders call for talks over Unilever job cuts Community leaders are calling for meetings with Unilever bosses over plans to shut sites in Flintshire, Swansea and Bridgend, cutting 450 jobs. The company said 200 jobs could go at the firm’s IT centre in Ewloe and 400 transferred to Merseyside. Around 225 jobs could be lost through the closure of its Swansea factory, and 25 at a distribution site in Bridgend. Flintshire and Swansea councils are hoping for talks with Unilever before a final decision is made in three months.
The consumer goods giant also plans to shut a plant in Slough, Berkshire, bringing the total number of losses to 800. The company has a total UK workforce of around 7,200 and makes products and brands ranging from Ben and Jerry’s ice cream, Marmite, PG Tips and Pot Noodles to Dove soap, Vaseline, Persil and Domestos. It said the proposed changes could take effect by the end of 2013 and would be made up of 500 direct job losses and around 300 contractor and third party jobs. ‘Take early action’ The Swansea factory makes personal care products, while in Bridgend the company has a distribution site.
Some of the jobs in Ewloe could be outsourced to Unilever’s IT centre in Bangalore, India. Reviews of the proposals are expected to be concluded in the autumn, with a final decision taken in September. However, Unilever said it would be investing ?40m in its largest UK factory in Port Sunlight, Merseyside. “We will discuss with Unilever what can be done by the council and Welsh government to keep the plant open,” said Christine Richards, deputy leader of Swansea council. Flintshire council leader Aaron Shotton said the authority would also be seeking talks. The advance notice by Unilever will allow us to take early action on behalf of local employees,” he said. Plaid Cymru AM (Assembly Member) for South Wales West Bethan Jenkins said she was concerned. “I’m very distressed to hear that my region will be taking the lion’s share of these proposed redundancies,” she said. “Swansea and Bridgend really do not want to be suffering further job losses at this time, and I will be taking the matter up urgently with the First Minister and with the company. We need better solutions than what has been offered here. Geraint Davies, Labour MP for Swansea West, said it was bad news at a difficult time for the economy. “Clearly, the Swansea-based city region, the four councils Swansea, Neath Port Talbot, Pembrokeshire and Carmarthenshire, (should) begin to pull together now,” he said. “We need to market Swansea as a place for inward investment. Much more needs to be done, but clearly this is very bad news at a very difficult time. ” (Source: www. bbc. co. uk/news – 15 June 2012) 6IBCS1212 19 6IBCS1212 20 6912254
