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Innovation, new markets key for Unilever

News, 10 September 2009

LONDON: Unilever, the consumer goods giant, is to focus on innovation as it seeks to drive growth, and could also draw three-quarters of its revenues from emerging markets in 15 years time, Paul Polman, its chief executive, has said.

The Anglo-Dutch firm is currently out-performing its major rivals Procter & Gamble and Nestlé in terms of improving its volume sales, a fact at least partly attributable to several initiatives launched by Polman.

Such schemes have included establishing 30 day turnaround plans for specific brands, resulting in the successful relaunch of Homa Gold in Germany, and the reformulation of Klondike ice cream bars in the US.

Speaking recently, Polman said "this year we will reignite the growth of the company without compromising operating margin and cash flow."

"We think for the whole year, and certainly for the second half, we will see margin improvement behind our products. We are growing our business in all of the categories and regions, behind strong innovations."

Unilever has also announced its intention to place an increased emphasis on nations from Indonesia to Brazil, and growing economies like these delivered over 50% of its revenues for the first time earlier this year.

"The importance of emerging markets in our growth strategy is tremendous. With the current trend, developing markets will probably account for 75% of our total sales in 15 years, by the sheer growth of the population and economy," said Polman. 

The owner of Knorr, Dove and Persil has doubled its sales in China over the last four years, and its ceo sees "no reason why we cannot continue to grow at that rate".

In order to achieve this goal, the London-based firm has invested €50 million ($73m; £44m) in a new research centre in Shanghai, which will focus on product development, and generating insights into trends and purchase patterns in the country.

Polman said this unit "is a milestone in our development. With our R&D system, we will serve consumers by producing new products with excellent technology and in-depth consumer studies."

Harish Manwani, president of Unilever's Asia, Africa, Central and Eastern Europe operations, added that the main "driver" of Unilever's activity in the world's most populous nation "is not to make money, but to continue investing in this market."

"You have to have an ambition that is commensurate with the market," he said, adding that, with regard to China, Unilever "isn't big" at present.

Indeed, problems of scale and complexity mean "no one has actually started penetrating the Chinese market in a real sense."

However, Unilever has "a planned strategy of building brands" according to Manwani, based, in the first instance, on establishing a pricing policy which will generate funds for future investment.
  
Coca-Cola has previously announced it will spend $2 billion in China, with a number

Data sourced from China Daily/Wall Street Journal; additional content by WARC staff