$1 Billion Lever Laundry Sale Turns the Tide for P&G

Business Would Be CPG Player's Biggest Challenger in Sector

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BATAVIA, Ohio (AdAge.com) -- Unilever is in late-stage talks to sell its North American laundry business to Huish Detergents, according to people familiar with the matter -- an unprecedented deal that would turn the category's leading U.S. private-label manufacturer into the biggest premium-brand challenger to behemoth Procter & Gamble Co.

Expected to be complete by the end of the month, the deal would value the business, including the All, Snuggle, Wisk and Surf brands, at around $1 billion, according to a person familiar with the talks. Unilever pegged total sales of the business at about $1.1 billion last year when it began looking for a buyer.

The deal would allow Huish, purchased last year by the private-equity fund Vestar Capital Management, to surpass Henkel, owner of Purex, and Church & Dwight, marketer of Arm & Hammer and OxiClean, as the undisputed No. 2 player in North American laundry.

A Unilever spokesman declined to comment, and executives at Huish and Vestar didn't return calls for comment.

Private to public
Brand marketers long have made private labels, if surreptitiously. Even P&G, which generally shuns the practice, makes private-label coffee and batteries. But Huish would be the first private-label manufacturer to become a premium-branded player in a major category.

North American laundry is an estimated $9 billion-plus business, and Huish would have about $2 billion of that, though it would still be behind P&G, with more than $5 billion.

Huish already owns the Sun value brand but gets most of its $1 billion in annual sales making private labels for the likes of Wal-Mart, Costco and others. It's also a contract manufacturer for some branded players, making powdered detergent for Unilever, for example, according to people familiar with the business.

The question is how a private-label manufacturer will run premium brands, particularly during an economic downturn marked by significant cost pressures and signs of a private-label resurgence. People familiar with Huish said it's no foregone conclusion the company would compete harder on price rather than boost marketing support. Huish could also leverage its relationships as manufacturer of private labels to get improved distribution for its newly acquired brands in limited-assortment outlets such as club and dollar stores.

Strategic retreat?
Bartle Bogle Hegarty, New York, handles All for Unilever. Interpublic Group of Cos.' Lowe handles Snuggle. WPP Group's MindShare, New York, handles media planning and buying. Wisk and Surf have had little media support and no agencies of record in recent years.

Unilever spent $35 million on media for the brands collectively last year, according to TNS Media Intelligence, with $20.6 million going to All and $12.9 million to Snuggle.

The Unilever brands had sales of $496.7 billion in the 52 weeks ended May 18, according to Information Resources Inc., a distant second to P&G, with sales of $2.6 billion, led by Tide and Downy. P&G's business is more than five times bigger than Unilever's, and it outspent its rival more than 6 to 1, with $227 million in 2007 media support for its laundry brands.

Unilever's laundry brands could use some tender loving care, as evidenced in part by a projected purchase price around one-time sales, half what P&G got in a deal to spin off its orphan coffee business off to J.M. Smucker Co. announced earlier this month.

The brands have lost share consistently for more than a decade -- more than seven points in laundry detergent since 1998, according to data reported by IRI and analysts. And Snuggle is close to losing the No. 2 position in fabric softeners to Colgate-Palmolive's Mexican import Suavitel in the IRI data, which excludes Wal-Mart, club stores and dollar stores.

Streamlining
But while the divestiture marks a defeat for Unilever in one of the most storied marketing wars of the 20th century, it also could be an effective strategic retreat at a time the company has been getting an upper hand in the 21st century.

Even with laundry included, Unilever in the past year has been matching, and in the first quarter substantially beating, P&G in global organic sales growth. The divestiture would eliminate a drag on Unilever's top line and transfer it to a stronger, more-efficient competitor that could give P&G a harder time.

"It's a business that very much rewards scale," said one industry veteran, adding that Huish now will have much more of it.


Key players

UNILEVER
BRANDS: All, Wisk, Surf and Snuggle
SALES: $423.6 million in laundry detergent and $73.1 million in fabric softeners

PROCTER & GAMBLE
BRANDS: Tide, Gain, Cheer, Era, Dreft, Downy and Bounce
SALES: $2 billion in laundry detergent and $597 million in fabric softeners

HUISH DETERGENTS
BRANDS: Sun and numerous contract-manufacturing private labels, including Wal-Mart's Great Value, Costco's Kirkland and Unilever's All.
SALES: $73 million for Sun and most of $190.8 million in private-label laundry detergent and fabric softeners.
Source: Information Resources Inc., 52 weeks ended May 18 for food, drug and mass outlets excluding Wal-Mart, club and dollar stores.
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