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Unilever challenges marketers

News, 21 January 2016

LONDON: Unilever is the latest FMCG business to announce a zero-based budgeting approach which requires marketers to justify their budgets from scratch every year.

In doing so it joins the likes of Coca-Cola, Heinz and Mondelez which have previously implemented zero-based budgeting (ZBB) across their organisations as part of cost-reduction measures.

Typically that has meant job cuts and plant closures, but Mark Clouse, now chief commercial officer at Mondelez, defended the use of ZBB, saying back in in 2014 that it was "not about slash and burn – it's about making a series of choices about what's going to matter most".

And it appears to be in that spirit that Unilever is adopting the financial technique, mirroring its Project Half which has sought to simplify processes and systems in order to reduce time spent on doing things that don't add value in order to focus on things that do.

"We will make a further step-change in our overheads and brand and marketing efficiencies with the global rollout of zero-based budgeting," CEO Paul Polman announced during a quarterly earnings call.

The company had previously trialled this in Thailand and reported a reduction in spending by two percentage points as a share of sales, Advertising Age noted.

Some observers have questioned whether ZBB is really a practical option for a global business dealing with large, complex budgets and numerous relationships and suggested that it may better be regarded as a philosophy that challenges marketers to think anew about what they spend and why.

Polman highlighted the growing importance of marketing, explaining that, even in a tough year ahead, "we will continue to invest in our brands to be sure that we strengthen our equities".

This, he continued, was a focus of the chief marketing officer, Keith Weed, who "has spent a lot of time driving that discipline into the organization and the marketing community.

"I think we're seeing the benefits of that," he added.

Data sourced from Seeking Alpha, Advertising Age, Financial Times, Marketing Week; additional content by Warc staff