Unilever, K-C shift strategy to catch P&G

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As they fight a resurgent Procter & Gamble Co., Unilever and Kimberly-Clark Corp. are lowering sales-growth targets and changing management, following a pattern not unlike that of their rival years ago.

Unilever co-chairman Niall FitzGerald said last week he'll step down Sept. 30-three years earlier than expected-and the company indicated it may not reach the 2004 sales goal set as part of its "Path to Growth" restructuring five years ago.

At the start of the five-year path in 1999, Unilever projected its leading brands would grow 5% to 6% by 2004. But they grew just 2.5% last year. Rather than lower the bar, Unilever tossed it out, saying it will stop providing quarterly and annual targets for sales and earnings and ad spending. It did, however, provide a longer-range sales goal, without a particular time frame, of 3% to 5% annual growth.

In a conference call with investors last week, Unilever indicated that its stringent plan prevented it from shifting strategies on marketing spending to accommodate a changing marketplace. "In reflecting on the reality of business," Mr. FitzGerald said, "it is clear we did not give ourselves sufficient flexibility on key metrics to cater to changes in market conditions. ... Businesses can move off-track and plans need to be revised."


Kimberly-Clark, which in late 2002 changed CEOs, likewise in July cut its long-term sales goal to an identical 3% to 5% annual target from the prior 4% to 6%. Last month, Kimberly also shuffled its global structure, cutting the number of executives who report directly to Chairman-CEO Tom Falk from six to four and reorganizing globally into two North Atlantic units handling personal care and tissue-towel, a developing-markets unit and a global business-to-business unit.

K-C's move follows Unilever and P&G into a more global management structure to manage marketing. And cutting top-line targets follows a pattern P&G Chairman-CEO A.G. Lafley set when he took charge in 2000. In the past two years, however, P&G has exceeded its top-line target.

While P&G's recent success has factored in its competitors' troubles, it's far from the whole story. Leading brands in Unilever home and personal care, which compete directly with P&G, grew 4.2% last year, compared to 1.8% for food brands. Key businesses that saw the biggest top-line disappointments last year included Slim-Fast, frozen dinners, prestige fragrance and laundry and home care-and only the latter two were affected by competition with P&G. Complicating the P&G competition is a general growth slowdown in categories where all package-goods companies compete, Deutsche Bank analyst Andrew Shore said.

built for speed

"These changes are all about creating an organization that's built for speed and becoming a more unified global company," Mr. Falk said in a conference call last month. "This new structure will help increase our speed in translating consumer and customer insights into innovative products."

In a report earlier this month, Mr. Shore, agreed, saying Kimberly-Clark's new structure could give it what P&G's plan accomplished years earlier.

Unilever, once highly decentralized regionally, already has adopted a more global structure for handling its biggest brands in recent years. Global directors now make key decisions on product launches and investments for many of the 40 brands that account for 65% of its sales.

It's a system similar to P&G's global "franchise managers," often presidents, who oversee its multi-category, multinational brands, supported by marketing directors and brand managers with responsibility for regional results. Altria Group's Kraft Foods adopted a similar system in its recent management overhaul.

"The goal is to have a lot of global brand leadership combined with someone watching the realities of the local markets," said Kevin Keller, professor of marketing at Dartmouth's Amos Tuck School of Business, who has noted a general shift toward more global direction of brands. "The reality is that people have trouble over-compensating one way or the other."

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