Polman powers Unilever surge

24 August 2009

ROTTERDAM: Unilever is outperforming consumer goods rivals Nestle and Procter & Gamble as CEO Paul Polman, a former senior executive at both companies, increases innovation and marketing to drive sales.

In his latest initiative Polman gave Unilever margarine managers 30 days to devise a plan to restore growth in Germany.

They decided to focus on premium brand Homa Gold, whose future was in doubt as German consumers turned to own brands, and turn it into a discount brand.

“We thought about how we could turn the threat of losing a brand into an opportunity in this crisis,” says Alexander Press, Unilever's global margarines boss. “The aim is to keep volume in the portfolio even if this means making less money on it.”

Unilever slashed Homa Gold's price by almost half to match own brand prices and changed the packaging to woo cost-coscious shoppers. Sales have resumed an upward path since the changes were introduced on July 1.

Homa Gold is one of 15 30-day plans Polman has introduced to win back customers since he took over as CEO in January.

Under other 30-day plans the company added more chocolate to Klondike ice cream bars in the US and increased the size of Rin Advanced detergent packs in India while maintaining the price.

In the Netherlands the company is selling miniature versions of its Twister ice pops in C1000 stores which cater to families. Meanwhile it is focusing on multi-packs of its more expensive Magnum Temptation bars in Ahold's Albert Heijn stores which cater more to double-income families.

Polman, who was finance chief at Nestle before joining Unilever and who worked for 25 years at P&G, has surprised the industry by his focus on marketing and cost-cutting.

He prepared the ground for this by abandoning Unilever's 15% operating margin target in February. Unilever, whose sales grew by 2% in the second quarter (Nestle's sales grew 0.7% while P&G's were flat) may now sell more items this year than either of its great rivals, something which hasn't happened since the early 2000s.

“It's a wake-up call,” says Jon Cox, analyst at Kepler Capital Markets in Zurich. “P&G and Nestle are, to a certain extent, caught with their pants down. It's going to be hard for them to catch up in terms of volume.”

Data sourced from Bloomberg; additional content by WARC staff