Unilever takes long term view

04 November 2011

LONDON: Unilever, the consumer goods group, is prioritising advertising and branding over promotions as it pursues a "long term" growth strategy, despite the challenging financial climate.

Jean-Marc Huët, Unilever's chief financial officer, argued the pressure on disposable income in Western Europe and North America, combined with rising commodity costs and intense competition in emerging markets, posed significant obstacles.

However, he added the organisation would not let economic fluctuations prove a distraction from its overarching focus on innovation, new market launches and brand building.

"In practice, this means continuing to invest behind our brands that are so vital to our future," Huët said on a conference call. "To be absolutely clear, we will not take short term actions that could damage the health of our brands over the long term."

As part of this process, Unilever has maintained the balance between its spending on advertising and the investment made in promotions.

"I am very pleased with the trends on where we are spending our A&P. And it's usually two-thirds, one-thirds and it hasn't really changed over the last 12 months," said Huët. "Importantly, we're driving more effectiveness, so we are getting more of a bang for our buck."

Such initiatives have also helped the company avoid passing on uniform price increases to consumers, many of which may opt to trade down rather than pay more.

"We are taking pricing judiciously. We are taking it where it's strategic. We are taking it where we are the leader and we are taking it where there is innovation and where we really think there is a proposition," said Huët.

Elsewhere, Unilever has attempted to transform a negative environment into a positive one by closely scrutinising all aspects of its operations.

"We have used these challenges as a catalyst to further accelerate the change program we are driving through Unilever," Huët said.

As an example of this, the firm has reduced its headcount, even at the managerial level, as well as greatly cutting back on the number of reports previously used to support strategic policy-making.

"With far fewer management touchpoints in the business, decision making involves fewer components than it did before," Huët said. "We could not be truly agile whilst drowning in such a sea of data."

Data sourced from Seeking Alpha; additional content by Warc staff