Targeted portfolio vital for Unilever

3 December 2012

NEW DELHI: Unilever, the FMCG giant, is continuing to develop its product portfolio both to overcome the challenge from private label products and to exploit the potential of emerging markets like India.

"There is always a threat of low-cost competitors. Then there are the low-cost regional competitors ... Low price or low quality will always have a place," Paul Polman, Unilever's CEO, told the Hindu Business Line. "Products have to compete."

Polman cited many segments in Europe – like wine, dairy and meat – where store brands are especially strong. "They are basically saying these are the categories that are commoditised," he said.

In response, Unilever reduced its operating costs by $1.4bn this year, thus helping ensure it has the requisite resources available if cutting prices is necessary.

However, the broader goal has been to rationalise its product stable so as to avoid sector offering few opportunities for national brands.

"One of the reasons we went out of olive oil was it was difficult to differentiate and it became a business that was more commodity-price driven, though it's a big market," Polman said.

"But in our categories, take oral care, or personal care, there are very few private labels. So our business model evolves to be sure that we stay ahead."

Alongside exiting these sectors, Unilever has launched a large number of its brands into new markets around the world where they were previously not on sale.

"In the last two years, we have introduced 300 brands in different countries," Polman said. "We are investing in people, capital, new brands [and] R&D; advertising and promotional spending has gone up."

Recently, the Anglo-Dutch company has made acquisitions like Alberto Culver haircare range in the US and Sara Lee's personal care and laundry arm in Europe.

"We have to offset the businesses that we have exited, such as the frozen business and some minor ones in the US. But the portfolio has become stronger because of this management," he added.

But Polman also expects 90% to 95% of future growth to be organic, a total buoyed by the creation and expansion of categories in countries like India. "If you look at India, Sri Lanka, or Pakistan, we have a good portfolio of brands," said Polman. "The opportunity to develop these markets is enormous," he added."

Data sourced from Hindu Business Line; additional content by Warc staff