Cannes 2011

Unilever Won't Sacrifice Ad Spending Because of Commodity Prices, Uncertain Economy

CEO Paul Polman Is Making Big Bets in Global Brand Building

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A day after Unilever CEO Paul Polman elevated the company's president for Asia, Africa and Central and Eastern Europe to the company's No. 2 spot, Mr. Polman punctuated the importance of those emerging markets by affirming his commitment to increased global ad spending and challenging ad agencies' readiness to work in those parts of the world.

Paul Polman
Paul Polman

There's been a significant shift of economic power to the globe's east and south, Mr. Polman told a packed house at the 58th International Festival of Creativity in Cannes. That shift is one of three key drivers for change that he outlined for the industry, each of which presents at least one corresponding challenge for the agency world.

He wondered aloud whether the agency model, for example, is the right one to help marketers meet a billion new consumers in developing parts of the world. "We have to shift our thinking to New Delhi instead of New York," he said. And in doing so, agencies will have to deal with a complex ecosystem of traditions, religions and cultures. "We will have to work harder ... to discover new insights," he said.

The internet, Mr. Polman's second big driver of change, has altered everything marketers do, he said, calling it the "defining intervention and invention of our time." For the first time, marketers have many truly global media companies in Facebook, Twitter, Microsoft, Google, Amazon and Apple. And Amazon, for one, often knows what we want to buy before we buy it because of its recommendation engine. "This intersection between fast-growing economies and digital is the arena for enormous growth," he said. "And we expect our agencies to have a [plan] of how to win in this space."

Finally, he emphasized Unilever's goal to become a more sustainable company even as it seeks to double the size of its business. In 2050, he said, "there will be 2.7 billion more people on a plant that is already strained" -- as if a new Bejing were being created every two months.

But a broad shift toward greater sustainability often requires a change in consumer behavior, so the challenge in front of the ad industry is to motivate that behavior change. He cited Unilever's One Rinse laundry product, which requires only one bucket of water rather than several to rinse the soap from clothing, and its Pureit water purification product.

Oh yeah, and then there's the economy. Martin Sorrell, Chief Executive of WPP, who was interviewing Mr. Polman and his chief marketing officer, Keith Weed, asked about the effect commodity prices and further economic stagnation would have on Unilever's global ad spending and its mix of promotion vs. advertising in particular. This would be the wrong time to forsake advertising for promotion or margins, Mr. Polman suggested.

"We've said to the market our goal this year is to have at least absolute spending flat from significant increases that we've done [recently]," he said. "At a time like this it's more important that brands connect with consumers," he said. "We've introduced about 100 of our brands in developing countries. As we speak we're introducing Dove in China. These are big bets and big launches and we have to spend money behind them."

Overemphasizing promotion and prices would be "the worst thing" the industry could do right now, he said.

So, asked Mr. Sorrell, fair to say that the "P" is down and the "A" is up? It is , said Mr. Polman, signaling good news not just for Mr. Sorrell's advertising company but for other global agency networks and media companies.

Unilever's challenges are ultimately the same challenges the agency world is dealing with, Mr. Polman said: a world where the centers of power are changing at the same as it undergoes a change in technology and the centers of knowledge. "Nobody predicted that pretty soon Amazon could be bigger than Walmart," he said. "That requires new skills in agencies and ourselves."

"At the end of the day it comes back to who has the knowledge and, increasingly, the Googles, the Facebooks, the Amazons have the knowledge," he added. "That's unsettling to the industry -- both your side and our side. That's a huge opportunity at the same time."

The question, he said, is whether those that have years of experience and inertia from doing business the old way will be able to successfully adapt.

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