Unilever May Shed $1 Billion Laundry Business in U.S.

Surprise Sales Talk Comes as Marketer Reports Better-Than-Expected Results

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BATAVIA, Ohio (AdAge.com) -- Unilever is exploring divestiture of its long-struggling $1.1 billion North American laundry business as part of a plan to jettison underperforming brands totaling as much as $2.7 billion in sales globally, CEO Patrick Cescau said today.
All and Snuggle are two key brands that would be affected by the proposed divestiture.
All and Snuggle are two key brands that would be affected by the proposed divestiture.

The stepped-up restructuring comes even as Unilever posted better-than-expected results, with organic sales, excluding impact of currency and divestitures, up 5% for the second quarter and 5.8% for the first half -- at or above the high end of Unilever's long-term 3%-5% target. Earnings-per-share growth was up 16% to 55 cents for the quarter, while ad spending rose ahead of sales.

U.S. business
Personal care led Unilever's first-half growth globally, up 8%, but the U.S. business -- including food, beverage, laundry and personal care -- pulled down results, up only 3%. Unilever said it maintained U.S. market shares broadly while gaining in personal care.

The results -- and surprise divestiture news -- sent Unilever shares up more than 4% in London and more than 3% in the U.S. by 10 a.m. Eastern time.

Key brands affected by the proposed divestiture are All, handled by Bartle Bogle Hegarty, New York, and Snuggle, handled by Interpublic Group of Cos.' Lowe, New York, which got $17.5 million and $7.6 million, respectively, in media support last year, according to TNS Media Intelligence. Others involved include Wisk and Surf, which don't have agencies of record.

Mr. Cescau said divestitures being considered for the North American laundry business and other yet-unnamed brands would add up to 0.4 percentage points to Unilever's top-line growth rate. The laundry sale would lop about 10% off Unilever's U.S. sales of $9 billion.

"Our business is profitable, but has not been growing in recent years," Mr. Cescau said of North American laundry in a statement.

The divestitures are part of a stepped-up restructuring effort in which Unilever will reduce headcount by about 20,000 over the next four years. The North American laundry business itself employs about 3,000.

Green products
He said Unilever's move to launch green-positioned super-concentrated detergents ahead of others, including Procter & Gamble Co., could make its business a more attractive asset for buyers. But Unilever's planned divestitures won't necessarily involve an outright sale; Mr. Cescau said the company also would consider joint ventures or licensing deals.

While Unilever may be exiting U.S. laundry, it remains a major player in Western Europe and the dominant player in emerging markets such as Latin America and India, where Mr. Cescau said the company remains committed.

The move hands a victory to rival Procter & Gamble Co. on its home turf, though it could prove less so should a new owner of the Unilever brands market them more aggressively or cut prices.

P&G has been able to hold ad spending on laundry brands steady or in some cases cut spending in recent years while still gaining share, in part because of less-aggressive competition by Unilever since its failed bid to launch detergent tablets here early in the decade.

Once a key battleground
The U.S. laundry business was once a key battleground for P&G and Unilever, particularly from the 1960s through 1980s when Unilever led the way in liquid laundry detergent with Wisk and expanded its global Surf brand here. But P&G steadily beat back the challenge and has gained strongly at its expense in the past five years behind stepped-up new-product activity for its key Tide and Downy brands. In the past year, Unilever has slowed, but not stopped, share gains by P&G in laundry, according to Information Resources Inc. data.

Colgate-Palmolive Co. has added to Unilever's woes with steady gains for its Mexican-import Suavitel, largely at the expense of Snuggle.

The other key players in the U.S. laundry business -- Henkel's Dial unit and Church & Dwight -- market value brands such as Purex and Arm & Hammer that traditionally have gotten little advertising. Those two companies, as well as orphan-brand companies and private-equity firms, are leading candidates to take on the Unilever brands.

Colgate exited the U.S. detergent business in 2005, selling its brands to orphan-brand marketer Phoenix Brands, which also has bought Unilever discards such as Sunlight dish detergent in recent years.
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