Unilever seeks quality ads

07 February 2011

LONDON: Unilever, the consumer goods giant, is focusing on innovation and producing high-quality advertising as a means of driving growth.

The owner of Hellmann's and Ben & Jerry's posted an 11% increase in revenue last year to €44.3bn ($60.4bn; £37.5bn).

Its strategy is based on the "Compass", with goals like doubling sales, adopting eco-friendly practices and modernising its portfolio, having purchased haircare specialist Alberto Culver and Sara Lee's personal care arm.

"We have undoubtedly raised the bar on performance. The significant gaps to competitors that we faced a couple of years ago have been closed," Paul Polman, Unilever's ceo, said on a conference call.

Across its core sectors, the firm holds the number one position in markets representing 60% of turnover, a surge of ten percentage points against 2005, and occupies first or second spot in areas covering 80% of its activity.

"As the need for pricing becomes more essential, this category strength is a key competitive advantage for us, as is the strength of our brands."

"Brands are our most important asset, and we will not take actions that could damage their health for the long term. We have no intention of slowing down in our pace of innovation, or in our new market launches."

The company's advertising and promotional spending reached €5.6bn in 2010, a €330m expansion on 2009 and €700m greater than 2008.

"This is a key driver of our long-term success - investing in our brands, the lifeblood of the business," Polman asserted.

In the second half, expenditure rose in developing economies and Western Europe, and the US saw a redirection of funds to "competitive pricing".

"We have substantially increased our advertising spend over the last two years. But it is not just the quantity of investment behind our brands that is improved, quality is higher also," Polman said.

"The metrics we use to assess the strength of our brand communication continue to trend steadily upwards."

Innovation has assumed an equally vital role, and Unilever regularly rolls out goods in 30 or 40 countries in rapid succession.

Dove Men + Care, Magnum Gold, Knorr Stockpot and Axe Twist are among the recent international additions to its roster.

Many of Unilever's extensions now generate €50m in incremental revenue during their first year alone.

Clear shampoo, created for emerging nations and unveiled in 2007, is worth over €500m a year today, while the Dove Age-Defying liquids range has achieved annual sales of €100m since 2009.

"We set out to launch fewer bigger innovations, to reach more markets more quickly and to improve product quality throughout our portfolio. All supported with higher levels of better quality advertising," said Polman.

"So, a powerful combination of more advertising, which delivers key messages more effectively, and acts in support of better quality products."

Approximately 100 existing brands have been introduced to new markets, such as Dove's haircare stable in China, Axe deodorants in Japan and Pepsodent in Cambodia

"As we do this, we typically both develop the markets in question and take share from our competitors," said Polman.

Looking ahead, the company expects conditions to be "volatile" in 2011 due to a fluctuating fiscal climate, unemployment and pressure on consumer spending, although emerging markets should remain buoyant.

"Today's climate of austerity, though difficult for many around the world, at least offers relative stability and certainty, elements that were lacking in those early crisis days of 2008," Polman concluded.

Data sourced from Unilever; additional content by Warc staff