Behind the Scenes at Unilever's Massive Factor in Hefei, China

Hit by melamine scandal, marketer focuses on safety, hygiene and a greener future

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HEFEI, China (AdAgeChina.com) -- Ever wondered what really goes on inside a Chinese factory? In the age of tainted milk, pet food, cough syrup and toothpaste, we did.

During a visit to Hefei, a grim industrial center in central China's Anhui province, Unilever agreed to open its doors to Advertising Age, providing a rare behind-the-scenes look at the company's second-biggest factory in the world. (The largest is in Brazil.)

The capital of Anhui province, Hefei was once an important administration center during China's imperial past as well as a crucial military stronghold.
Addy Chen, general manager of the Unilever Hefei Industrial Park
Addy Chen, general manager of the Unilever Hefei Industrial Park
Today, it is a stronghold of a different sort, as a manufacturing center for multinational and local companies.

Besides Unilever, Coca-Cola Co., the Chinese white goods and electronics giant Haier Group, Uni-President Enterprises Corp., Taiwan's largest food conglomerate, and Anhui Jianghuai Automobile Co. all have major plants in Hefei.

Located on the outskirts of the city, the Unilever plant's group of factories produce many of the brands the company sells in China--Pond's, Vaseline, Dove, Hazeline, Clear, Lux, Comfort, Omo, Cif, Zhonghua (a local toothpaste brand managed by Unilever) and Lipton. Most are market leaders, or fight rival Procter & Gamble products for brand leadership in their categories.

This enormous operation, called the Unilever Hefei Industrial Park, is normally closed to visitors and taking photographs is strictly prohibited. Even so, the tour provided a fascinating look at what companies like Unilever are doing--and hope to do--at a time when manufacturing in China has turned into a global branding issue.

The challenges facing the factory's general manager, Addy Chen, would be familiar to any executive operating in China: the constant battle to find and retain skilled workers, rising operational costs, the fickle tastes of consumers and the fast-changing economy.

Mr. Chen already senses slowing demand for Unilever products as China's growth rate slows. Even nature can turn against him.

The massive snow storm that hit central China, including Anhui province, last winter "hurt us a lot," he said. Unilever products couldn't be shipped out for weeks.

The factory visit also illustrated the frustrations facing manufacturers in a country where unscrupulous partners sometimes seek opportunities to cut corners.
The Lipton tea bar
The Lipton tea bar
The consequences for multinationals range from mild irritation among shoppers over shoddy products to global consumer boycotts and lawsuits caused by health and safety abuses. The current melamine scandal is just the latest hit to the image of "Brand China" as a manufacturing center.

Unilever's plant in Hefei is wholly-owned and operated by the consumer goods giant, so the company keeps tight control over almost every phase of the manufacturing process, even in the areas it outsources.

For example, the company that produces the plastic packaging for cleanser and shampoo brands operates on the grounds of the Hefei plant, and its production facility was custom-built by Unilever.

To get inside the factory, visitors are required to wear protective clothing, a hair net, a hard hat, goggles. I even had to wear Unilever socks and rubber shoes.

"If anything happens to you on the grounds, I'm responsible," Mr. Chen said with a stern look, the first of many indications that cutting corners in this factory would not be tolerated.

During the next two hours, we briskly walked through every phase of the mixing, packing and packaging required to turn phosphates and enzymes into detergents and raw tea into tea bags.

Hygiene was a recurring theme. For example, we had to wash our hands--with Unilever soap, of course-- before entering each building. That's about five times over the course of the visit.

Getting into the Lipton production area, the newest factory on the plant grounds, required washing hands twice, changing clothes yet again and stepping into an air-blowing chamber to be sanitized.

"Because these products are ingested, I cannot allow any dirt or dust in this factory. I always remember that my six-year-old daughter is also consuming these products," Mr. Chen said.

Tea is the newest addition to the plant, which has been open for five years and cost over $50 million to build. Lipton is the only food brand produced in the Hefei plant, but Anhui province is a major producer of green tea.

Mr. Chen's obvious pride in the factory's strict hygiene protocols, particularly in the tea zone, inevitably led to a discussion about the melamine scandal in China.

Unilever is one of several multinationals, including Heinz, Cadbury, Mars and Nestlé, that has pulled products from store shelves. It recalled four batches of Lipton 3-in-1 milk tea powder on sale in Hong Kong and Macau that were made with small amounts of melamine-tainted milk powder.

The executive office
The executive office
The tainted batches were made in the Hefei factory. Ironically, Mr. Chen said, Unilever only switched from imported to locally made milk powder in May. Unilever stores samples of every batch of its products for two years, so testing was implemented as soon as the scandal broke.

"We detected melamine only in one lot and the level was not high. It was an acceptable level, but we decided to recall it anyway," he said with palpable anger and frustration.

Has Unilever stopped using the supplier?

"Of course," he responded sharply. "It really hurt our confidence level. But it's a very big supplier that also didn't know about melamine and they have also started to take actions to prevent it from happening again. Even so, we had to stop using them."

He paused, and added with surprising candor, "I hate this behavior. I hate this melamine issue, being taken down by a supplier when we have such strict standards."

I had the sensation of talking with a straight-A student who failed a test because another student cheated by looking at his answers.

Before joining Unilever five years ago, when the Hefei plant opened, Mr. Chen spent three years with General Electric and before that, six years at Procter & Gamble Co. in plant management and engineering roles.

The factory's front gate
The factory's front gate
His own story mirrors that of many of his 2,200 employees. His family lives in Shanghai, where his wife works and his daughter can benefit from a superior school system--and superior air quality. Like many of China's industrial centers, Hefei suffers from crippling air and water pollution.

He has also found Unilever is more efficient than Coca-Cola at mixing materials, while Coke has a more efficient packing system. His personal desire for a cleaner environment has led to professional efforts to clean up. Unilever has sponsored studies with a local science and technology university to identify which companies are pouring pollutants into Hefei's rivers.

The plant's water purification system meets Unilever's global standards, which are higher than the requirements of the local government. In one of the Chinese touches dotting the grounds, like a feng shui fountain, gold fish live in the water recycling pool.

He's also talking to the managers of the Coca-Cola factory less than a mile down the road about cooperation to reduce both companies' carbon output.

"Coke handles a lot of its China distribution out of Nanjing, so they send trucks there that come back empty. Unilever sources a lot of its raw materials from Nanjing. If we can bring our supplies here in their empty trucks and share the cost, we can save a lot of fuel."

"Maybe we can learn from each other. It's still in the discussion phase but we're talking ideas," he said.

The tour ended back in the boardroom, with a chance to change back into my own clothes and shoes, and a history lesson, illustrated by some photographs of Hefei's cultural hot spots that seemed unrealistically green.

But his pride in Unilever certainly was genuine: "Lever Bros. opened its first soap-making factory in China in 1923. Today, I'm part of this journey."

Products made at the Unilever Hefei Industrial Park
Products made at the Unilever Hefei Industrial Park Credit: Normandy Madden
Addy Chen in the factory's executive building
Addy Chen in the factory's executive building Credit: Normandy Madden
The Lipton tea factory inside the Hefei plant
The Lipton tea factory inside the Hefei plant
The boardroom
The boardroom Credit: Normandy Madden
The factory's central distribution center
The factory's central distribution center


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