Unilever reorganization shifts P&L responsibility

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A marketing reorganization by Patrick Cescau, Unilever's newly minted single CEO, does nothing immediately to change duties of most brand-development managers and directors at the core of most of the company's marketing in the U.S. But it does have far-reaching implications for their bosses and their bosses' bosses-who ultimately call many of the marketing shots-and complicates the issue of just who has the power over marketing spending.

Beginning in April, global category presidents Vindi Banga (overseeing food) and Ralph Kugler (overseeing home and personal care) will lead organizations responsible for developing the marketing, product mixes and broad strategic direction for the company's roughly 400 brands.

Regional presidents, including John Rice, who was CEO of Unilever Bestfoods in the U.S. and now becomes president for the Americas, with an empire extending from Canada to Argentina, will head an organization responsible for sales, trade marketing, some multi-brand marketing programs and media buying.

The global business presidents will have authority to choose/reassign creative agencies. But media buying (and purchasing elements of the creative relationships) would rest with the regional presidents' organizations. So while brand managers and directors in the global category businesses will sign off on the plans that actually allocate Unilever's roughly $600 million U.S. budget, the regional organization headed by Mr. Rice will actually have the power to set the budget and buy the media. A global team of top executives headed by Mr. Cescau in London will hash out the priorities that shape the budget. That divides the power many ways and leaves unclear who ultimately will have the upper hand.

key difference

On the surface, Unilever's new system resembles in some ways the one rival Procter & Gamble Co. adopted nearly six years ago (see story at right). Under that system, managers of global business units are responsible for brand management and product development, and managers of regional market development organizations are responsible for sales, trade marketing, media and multi-brand marketing.

But even without details fully revealed or decided, Unilever's system differs from P&G's in one key respect: Profit-and-loss responsibilities lie with the regional presidents rather than the global category organizations that control marketing, product mixes and strategy. At P&G, global category bosses have primary P&L responsibility.

That raises one big implication and another big question, said a person close to Unilever and its strategy. The implication, he said, is that Unilever's global marketing chiefs, such as Simon Clift of Unilever HPC, and global brand directors for such big brands as Dove and Axe, after gaining P&L responsibility less than two years ago, now will lose it.

The question, he said, is whether regional presidents who bear P&L responsibility, such as Mr. Rice, will automatically accept and execute the marketing, product and strategic plans handed to them by category executives. The clout of global directors had rankled some marketers in the regions, the person close to Unilever said. The new system appears to limit that clout and shift Unilever's focus beyond big brands.

"The devil is in the details," said a veteran executive of P&G's restructuring. "You are essentially moving decision rights around, and that is very difficult, since new kings are crowned and others dethroned."

Some U.S. analysts and retail buyers have criticized Unilever for letting its focus on global brands like Dove sap resources from once-strong local brands like Vaseline. And even before the new structure kicks in, Unilever already appears to be modifying its course. For example, it's rolling out a restage of Vaseline Intensive Care even as it prepares to launch Dove body lotion in the U.S., retail buyers said.

Market modeling

It took more than five years, but Procter & Gamble's marketing model is attracting envy.

The company's successes under the new system have competitors taking notice and mulling how their own organizations might replicate parts of the model. "It was a new-to-the-world structure," said an executive of a package-goods player that competes against both P&G and Unilever, "and now it appears to be working."

The structure cordons off troubled brands, keeping them from sapping resources. P&G Chairman-CEO A.G. Lafley has credited the structure with reviving such brands as Crest that were low priorities for regional bosses but became focus areas for their global managers.

Getting to the point of admiration didn't come easy for P&G. Durk Jager, who as CEO presided over development and implementation of the new world order, found himself out of a job after two quarterly earnings misses. One aggravating factor was the relocation of hundreds of managers from Brussels, Belgium, to Geneva, for tax purposes. Mr. Lafley became CEO amid the ensuing disarray, but he didn't have to take responsibility for causing it.

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