Unilever plots R&D drive

17 March 2011

LONDON: Unilever, the FMCG giant, is heightening its focus on innovation, seen as a key growth driver given rising commodity costs and challenging trading conditions in the US and Western Europe.

The company, which manufacturers leading brands like Ben & Jerry's ice cream, Persil detergent and the Dove beauty range, has adopted a different approach to R&D after appointing Paul Polman as chief executive.

Guiding principles now incorporate rolling out fewer, but more substantial, new items and brand extensions, often unveiled in between 30 and 40 markets in quick succession.

Recent introductions include Dove Men+Care, the Knorr Stock Pot and Axe Twist, and the firm believes many such projects can realistically be expected to deliver incremental revenues of €50m ($69.7; £43.4m) in their first year.

Speaking at the Reuters Global Food and Agriculture Summit, Michael Polk, Unilever's president of global food, home and personal products, suggested current results proved progress had been made.

"In 2010, roughly 33% of our turnover was touched by innovation, which is a very good number by industry standards," he said.

"That's a big number. We hope to sustain that, and will sustain it, if not increase that."

Looking ahead, Unilever intends to fuel future sales expansion through delivering new offerings capable of making a significant impression on the bottom line.

"Innovation will step up in 2011 versus 2010. It needs to. And in 2012 versus 2011. It needs to in order for us to realise the ambition we have stated externally," said Polk.

Advertising and promotions play an integral role in supporting this pipeline, and the Anglo-Dutch operator has boosted its outlay here by €700m across the last two years.

Improving the effectiveness of communications has been a major objective during the last five years, enhancing what Polk termed the "equity benefits that have accrued to our brands".

Overall, Polk described Unilever's primary "formula" as "great brands and innovation ... the work we are doing in the marketing area on the brands themselves, product quality, product performance and innovation."

Such values could be essential for the company, as the input costs required for raw materials like edible oils, tea, tomatoes and milk are growing, set to make up 4% of Unilever's turnover in 2011.

As raising prices will also form a central part of the organisation's strategy in response to this trend, creating goods able to command a premium thus constitutes an important goal.

"We will price to the degree the consumer is prepared to pay ... without compromising our growth agenda and to the degree that the competitive environment allows," said Polk.

Data sourced from Reuters; additional content by Warc staff