Unilever gains from advertising and innovation

06 August 2010

LONDON: Unilever, the FMCG giant, is focusing on advertising and innovation to build brand equity with consumers, reducing its reliance on low prices as a result.

The maker of Ben & Jerry's, Surf and Vaseline boosted its investment in advertising and promotions by 180 basis points in the last quarter, an approach also followed by rivals Procter & Gamble and Reckitt Benckiser.

"Despite the significant step up in competitive pressure … A&P levels have been stepped up considerably," said its chief executive, Paul Polman.

"We've actually increased it in the absolute, despite the lower cost of media on some things … so the increase is probably bigger than the numbers show."

Unilever's recent activity in this area has included a $300m (€227m; £189m) partnership with Time Warner covering online, print and TV, and embracing everything from traditional ads to branded content.

It was also one of several major corporations to buy up inventory on Apple's iPad, and Polman suggested the company's strategy is based on forging meaningful ties with shoppers.

"The bulk of our A&P is behind the A, not the P … so it is long-term equity building and that is paying off for us," he said. "I think we're now more or less at competitive levels [and] I don't see us going down."

While key battlegrounds like China and India demand heightened marketing budgets, an uptick in expenditure equally paid dividends in Europe, where the trading climate is particularly austere.

"The consumer is hit with less spending power, increased taxes and higher VAT across Europe," Polman warned.

"In Europe right now … you see our margin expanding and yet you also see a significant increase in A&P. So in this case, we're getting the cake and eating it too."

Innovation has proved a primary factor behind Unilever's adspend growth, with launches like Dove for Men, Knorr Stock Pots and variants of Magnum ice cream being unveiled in at least 30 nations simultaneously.

"We've clearly seen a pick up in the pace of innovations. They're getting bigger, better and stronger and we're actually rolling them out faster across the world," said Polman.

"We will continue to focus on driving our innovations, focusing on our core brands … The winners will be the ones that innovate smartly. And that's what we remain focused on."

The company is "renewing" around a third of its portfolio - a process which includes brands such as Timotei shampoo in the UK - in an effort to ensure it remains relevant and attractive to shoppers.

Similarly, existing offerings have been extended into countries for the first time, such as Lifebuoy soap in parts of Latin America, Cif cleaner in India and Domestos bleach in Italy.

"In the last six months, we've probably had a heavier new-brand introductory programme than we've had in many preceding years," said Polman.

"Strengthening our brands where we are, introducing our brands in territories where we are not; there is still ample opportunity."

Polman added that the organisation's emphasis on advertising and bringing fresh products to market, and that it had enhanced its position when it came to pricing.

"We're actually improving our pricing situation, quarter to quarter," he argued. "So we're building our shares; we're growing our business without further investing in pricing."

"Again, that shows the strength of the innovation programme that we're rolling out."

Data sourced from Unilever/Cantos; additional content by Warc staff