Unilever takes tighter approach to R&D

4 January 2013

LONDON: Unilever, the FMCG company, has yielded substantial benefits from scaling back the number of projects in its innovation pipeline by over 80% to prioritise a smaller amount of big new ideas.

The firm's research and development activity revolved around approximately 600 projects last year, of which 90 were launched across its global markets inside a 12 month period.

Such figures can be compared with the 5,000 proposals pursued in 2005, when only eight offerings went on to be introduced into more than ten different countries.

"You want fewer, bigger ideas," Paul Polman, the company's chief executive, told Bloomberg. More specifically, he stated the firm solely emphasises schemes likely to generate at least €50m in sales.

Some 80% of new product development staff in the personal care sector also work "in the field", with the goal of creating high-end lines promising greater margins. This shift has meant suppliers today deliver 70% of suggestions for R&D activity in this space.

Moreover, Unilever has invested €500m in a new venture fund which is seeking to foster the next generation of beauty and personal care products, like personalised skin treatments.

"This is a big opportunity for us to make sure that we are able to play the top end as well as we play the mass end," Harish Manwani, Unilever's chief operating officer, said.

Innovative thinking has equally applied to its supply chain, with on-shelf availability, or the frequency of products being in stock, rising by eight percentage points in three years.

Unilever has also rolled out existing ranges into new markets. TRESemme shampoo was launched in Brazil in this way, and in under a year became the top brand in hypermarkets and drugstores with €150m in sales.

Polman has cut €1bn in costs a year since becoming CEO in 2009, as well as trimming unnecessary levels of management and slashed the number of financial reports by 90% from the 20,000 he inherited.

Over the same timeframe, Unilever's share price has risen by 68%. Like-for-like sales also grew by 6.6% in the first nine months of 2012, while Procter & Gamble, its rival, logged expansions of 3% or less.

"Our business is not rocket science," said Polman. "There's nothing intellectual about this. It's about being a little bit better every day."

Data sourced from Bloomberg; additional content by Warc staff