In 2000, disposed of 27 businesses for $854 million
Major disposals representing 99% of the total sales price include:
* European Bakery Supplies Business
* Benedicta (mayonnaise and sauces)
In 2001, disposed of 34 businesses for $4.8 billion
Major disposals representing 96% of the total sales price include:
* Dry soups and sauces business
* Best Foods Baking Company
* North American seafood business
* Unipath (women's health diagnostics)
* Elizabeth Arden
In 2002, disposed of 35 businesses for $2.6 billion
Major disposals representing 95% of the total sales price include:
* Mafer (snacks)
* Clemente Jaques (culinary)
* DiverseyLever (institutional, industrial cleaning)
* Nocilla (chocolate spreads)
* Atkinsons (fragrance)
Unilever, like many CPG companies, had been struggling to squeeze growth out of a mature consumer-goods market. A bold acquisition strategy turned it into one of the largest and most powerful CPG companies in the world, but the growth came at the price of complexity: 1,600 different brands, a product range greater than any of its peers, all run through a decentralized network of independent regional organizations. Numerous nonbranded operations also blurred management focus. So, in 2000, Unilever announced a five-year Path to Growth initiative with ambitious objectives: sales growth of 5% to 6% a year and 16% operating margins.
During the next three years, the company, recognizing that its growth had been somewhat undisciplined and ad hoc, divested more than 100 businesses and, despite 20 strategic acquisitions in 2000 alone, stayed on course by shedding numerous brands and closing manufacturing plants. The Path to Growth plan started to deliver real benefits. Unilever's top brands represented 90% of sales, up from 70% when the plan started. By 2003, Unilever was well on its way to having 12 brands with more than $1 billion each in sales, up from four such brands in 1999. Procurement standardization and improved product mix were supporting operating margins of close to 15%-up from 11.2% in 1999 and just one percentage point shy of the company's overall five-year margin target. The restructuring and incremental growth was providing needed capital to fund increased advertising and promotion spending. In addition, Path to Growth addressed organizational problems by establishing two key divisions-foods and home and personal care-with global category-management teams and greater responsibility with regional management.
However, while the Path to Growth plan delivered many benefits, it failed to generate sustainable growth. At the end of 2002, Unilever had tremendous leading-brand growth momentum, but the 4.2% top-line growth rate achieved in 2002 quickly fell out of reach in 2003 in the face of fierce competition. The low-carbohydrate diet craze also took a toll. Unilever had to back away from its aggressive top-line growth goals. The company now expects top-line growth of 2% to 4% and has shifted its focus from meeting quarterly growth targets to returning cash to shareholders. According to one analyst, "They've decided to stop shooting for the stars."
Why did Unilever falter? Unilever understood its problems better than it could deliver the solution. In the first place, while Unilever rightly pruned its brand portfolio, it could not deliver a distinct and clear advantaged capability that could sustain growth in the core (unlike P&G, which clearly defined its advantaged capability as the ability to leverage scale and global technology platforms in order to drive innovation). In the second place, although it had a coherent strategy, Unilever did not adjust the strategy for regional imbalances and establish a way to consistently execute. Furthermore, new trends and increased competition derailed the expected financial benefits from maturing. In the end, Unilever demanded more from the remaining brands in its portfolio than they could deliver.