Unilever increases ad spend 11.4%

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LONDON -- Niall FitzGerald, in his first annual results presentation since becoming co-chairman of Unilever last September, dramatically illustrated the company's commitment to pruning non-core brands and focusing on consumer goods by announcing the company's intention to put up for sale its profitable specialty chemicals businesses, which had combined 1996 sales of $4.74bn.

Last year Unilever decided to focus on the 13 "corporate consumer goods categories" it identified across the food, home care and personal care sectors by making 27 acquisitions (including Helene Curtis hair care) and making 23 disposals (including Rimmel-Chicogo color cosmetics) for a net investment of $1.3bn.

"For Unilever this sale (of specialty chemicals) will enable even greater concentration on the balance of our business to achieve superior long term growth, in particular in the developing and emerging markets," FitzGerald said in London on February 11.

If Unilever found a buyer for specialty chemicals the proceeds would remove all net borrowing, but instead of clearing its debts the company intends to use any cash raised to invest in existing core brands and to make acquisitions.

More disposals are planned for 1997 because "an unacceptable proportion of low priority and poorly performing sectors " need urgent attention, FitzGerald says.

In addition to Unilever's strategy of focusing resources on a core group of product categories and geographic regions, FitzGerald says the company intends to focus on product innovation to sustain profitable growth. "We have continued to focus our innovation more sharply on the corporate categories and to relate it more closely to the needs and aspirations of our consumers in developing and emerging markets," FitzGerald says.

Unilever is expanding its network of regional "innovation centers" which are being set up to develop product ideas, handle research and technology, and share marketing expertise. FitzGerald announced that important new development facilities are being developed in China and India. Unilever is establishing an innovation center in China for tea, ice cream and detergents. India, which already had an innovation center for detergents and personal care products, is opening a center for food in Bangalore.

Unilever's main innovation centers include: oral care (Milan), hair care (Paris, Bangkok, Buenos Aires, Chicago) ice cream (Rome, London, Hamburg, Green Bay, Wis.), fragrances and deodorants (London, Buenos Aires, New York). In 1996 Unilever spent $948m on research and development or 1.8% of its total sales.

"But innovation is only of value if it is effectively communicated to the consumer. During 1996 we invested heavily in supporting and promoting our key brands," says FitzGerald. During 1996, Unilever spent $5.98bn on advertising, representing 11.3% of total sales and up 11.4% from 1995.

Asked if Unilever was following Procter & Gamble and Barilla's experiments in Europe with "every day low pricing" or "value pricing", FitzGerald said a single, simplistic focus on every day low pricing doesn't provide the drive which its proponents suggest.

Copyright February 1997, Crain Communications Inc.

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