Unilever targets emerging markets

18 January 2011

LONDON: Unilever, the FMCG giant, believes emerging markets will deliver around 70% of its revenues by the end of this decade, indicating a broader shift in the global trading climate.

Paul Polman, the corporation's chief executive, suggested in an interview that the recession had exerted a profound impact on all major brand owners.

"If you look at the changing forces in the world it is very clear that already now 75% to 80% of our growth is in the emerging markets," he told The Daily Telegraph.

"A lot of that is about market development, it is about growing the pie. It is very difficult to see that change."

"From where we are as a company, in ten years' time I will have 70% of my business in the emerging markets."

The scale of such a transition must not be underestimated, although progress in this area seems slow in Western Europe and North America at present.

"Four of the world's top ten banks are Chinese banks which many people in this part of the world can't even pronounce," Polman stated.

"Our investors in the US ask us, say, about the private label initiative of Wal-Mart in Arkansas but they don't know what's going on in Indonesia."

While Unilever is headquartered in the United Kingdom, Polman argued the transformation taking place means old models are inadequate.

"That, of course, requires you to think about your operating framework, your talent base, it requires you to think about the culture that you have to succeed and to attract and retain talent," he said.

"Does that mean we'll leave the UK? I honestly think that is not important. We have great research here, but at the same time we have opened a research centre in China, opened a training centre in Singapore."

In a bid to convince shareholders regarding the possibilities afforded by fast-growth economies, Unilever held an investor event in Singapore in 2010.

"We wanted people to understand the value creation opportunity in emerging markets so that they are able to fully value companies like ours," said Polman.

The manufacturer of Knorr, Ben & Jerry's and Dove serves 150m consumers every day and boasts a presence in approximately 170 countries across the globe.

Recently, the organisation established the dual aims of halving the environmental footprint generated by its goods - both in-house and among customers - and doubling sales.

Polman described this effort to "decouple" sustainability and growth as equally "scary" and essential.

"People always think that to do the right thing costs you more. That is not true at all. It can actually ignite innovation and lower your costs," he said.

"The alternative of not having sustainable sourcing, of having to deal with the effects of climate change, is a much higher cost on business."

He also asserted the expansion of the global population to 9.6bn people by 2050 demands a coordinated response.

"According to the WWF, the world currently lives off 1.3 worlds in terms of use of resources," he said.

"When you add 3bn people and increased standard of living, that figure rises to three Earths if you live like the US or the UK. That is just not going to work. We need to change things."

Data sourced from Daily Telegraph; additional content by Warc staff