14 Aug Read the Case (p.524) Unilever and answer the Unilever: The Assignment After C

Read the Case (p.524) Unilever and answer the
Unilever: The Assignment
After Cescau was elevated to the top job, Unilevers board streamlined
the companys management structure. Now
there is a single
chief executive; previously, there had
been one in Rotterdam and one
in London. Cescau asserted that, with a
single chief executive, the
need for consensus was replaced by speed
at making decisions. As
noted, many of those decisions concerned
doing good. However,
some observers were skeptical of Cescaus
determination to operationalize
a responsible business philosophy. Cescau
recalled, The
company was not doing well. There was an
article saying that I was
draping myself in a flag of corporate
social responsibility to excuse
poor performance. I was so angry with
that.
Cescaus commitment was put to the test in
2008, his final year as
CEO. Greenpeace launched an advertising
campaign alleging that
Unilevers purchases of Indonesian palm
oil were contributing to
rainforest destruction. Palm oil, a key
ingredient in Doves beauty bar,
comes from oil palm trees that grow in
Indonesia and Malaysia. Rising
world prices for the commodity prompted
Indonesian farmers to cut
down large swaths of old-growth rain forest
and plant fast-growing
oil palms. Specifically, Greenpeace
identified the operations of Sinar
Mas, an Indonesian company that is a major
palm oil supplier, as
contributing to deforestation.
The media strategy for the Greenpeace
campaign included newspaper
ads in London and a video on YouTube.
Fliers parodied
Unilevers Campaign for Real Beauty; for
example, they showed pictures
of orangutans juxtaposed with the headline
Gorgeous or
gone? John Sauven, executive director of
Greenpeace, explained
why his organization had targeted
Unilever. Everyone has heard of
those brands. They are the public face of
the company.
Cescau responded by calling for a
moratorium on rain forest
destruction by Indonesian oil producers.
The Unilever chief also
pledged that his company would only buy
palm oil from producers
who could prove that the rain forest had
not been sacrificed in the
production process. The move allied
Unilever with the Roundtable on
Sustainable Palm Oil (RSPO), an
organization that certifies palm oil
producers. A Unilever spokesperson also
indicated that the proposed
change in Unilevers palm-oil sourcing
strategy had been in the works
for months. Nevertheless, Greenpeace and
other nongovernmental
organizations claimed victory.
Unilever brought its message to the public
with a print ad campaign
featuring the headline What you buy in
the supermarket can
change the world. The body copy outlined
Unilevers pledge that by
2015 all our palm oil will come from
sustainable sources. The ads
ended with the tagline Small actions, big
difference.
Doing well is also part of the
leadership equation at Unilever.
Cescau understood the importance of
improving Unilevers profitability.
To this end, he continued a restructuring
drive that was initiated by his
predecessor, co-chairman Niall FitzGerald.
Specific actions included
reducing Unilevers bureaucracy by
removing several management
layers. Cescau also reduced the top
management head count from
25 people to 7 and narrowed the vertical
distance between management
and marketing. The company also shed
hundreds of brands
and closed dozens of factories in France,
Germany, and elsewhere. In
Cescaus view, the new, leaner structure
would translate into more
rapid response to changing market trends
and consumer preferences
and ensure quicker rollouts of new
products.
Cescau also bet heavily on emerging
markets to jump-start sales
growth. Rising incomes mean that many
people are purchasing
consumer packaged goods for the first
time. One scenario: As increasing
numbers of people in developing countries
buy their first washing
machines, they will need to buy laundry
detergent. To capitalize on such
trends, Cescau shifted budgetary resources
out of mature markets such
as Europe; those funds were used to
support research in India and other
emerging markets. Brand managers were
instructed to innovate by
taking a clean slate approach to
developing new products for emerging
markets. As Steph Carter, packaging
director for deodorant brands,
noted, Traditionally, we would have taken
existing products and
then tried to fathom how to adapt them for
the developing world.
Our thinking has changed.
The Polman Era Begins
Paul Polman took over as CEO in January
2009; a former Nestl
executive, he is the first outsider to
lead Unilever in its 80-year history. In
his first months on the job, Polman
initiated a shift in Unilevers core
strategy. In the past, the company
generated sales growth by increasing
prices. Noting that this was the wrong
strategy for recessionary times,
Polman said the new priority would be to
increase sales volumes. The
change entailed some risk: holding the
line on prices could put pressure
on margins, given the trend of rising
costs for the agricultural commodities
that are key ingredients in Unilevers products.
Polman was also keenly aware that many
budget-conscious shoppers
were choosing less-expensive private-label
supermarket products
instead of well-known name brands. Polman
vowed to improve product
quality across the board and to boost
marketing and advertising
spending. To support the increased
investment, he accelerated some of
the cost-cutting measures that his
predecessor had initiated. For
example, the timetable for planned factory
closures and job cuts was
moved up; Polman also froze executive
salaries and changed the bonus
policy. He established 30-day action plans
for managers of brands
with flagging sales. He also replaced
about one-third of Unilevers top
100 executives, including the chief
marketing officer.
When it comes to demonstrating Unilevers
commitment to its
customers, Polman sends clear signals to
his employees. He spends
about 50 percent of his time on the road,
with regular stops in Asia,
Latin America, and, of course, Europe. In
a recent interview, he noted,
Theres not one visit in a country when I
dont meet a consumer. If
we want to make this company passionate
about consumers and
customers, the example starts at the top.
That passion is evident in a flurry of
marketing activities orchestrated
by Polman. One is the quick pace of
new-product rollouts,
especially in emerging markets. For
example, Unilevers home care
unit was first-to-market with liquid
laundry detergent in China; it also
introduced a dishwashing liquid in Turkey
in less than 30 days.
Innovation has also become a key element
for shoring up the value
proposition of Unilevers brands, with
existing brands such as Surf
laundry detergent getting an upgrade in
the African market.
Driving growth in the personal care
category is another priority for
Polman. By itself, the global deodorant
segment represents an estimated
$17 billion in annual sales. To tap into
that market, the Dove brand has
been extended to mens products. Dove for
Men has been rolled out in
dozens of countries. Meanwhile, Doves
product managers devised a
new strategy for persuading women to
switch deodorant brands. Dove
Ultimate Go Sleeveless resulted from
company research designed to
discover insights about consumer attitudes
towards underarms. What
the researchers learned is that 93 percent
of women think their armpits
are not attractive. Dove Ultimate Go Sleeveless is formulated with
moisturizers that, the company claims,
will result in nicer-looking
underarms after just a few days use.
The ice cream and beverage unit is also on
the move. Unilevers
Magnum brand premium ice cream bars are
the worlds top-selling ice
cream novelty. Although Magnum enjoys
great popularity in Europe, it
was not introduced in the United States
until 2011. Hagen-Dazs and
Mars are already entrenched in the market;
undaunted, the Magnum
marketing team is confident its brand will
stand out. One manager
explained that an important part of the
brands equity is the loud
cracking sound heard when someone bites
through Magnums thick
chocolate shell.
Even as he oversees these and other
marketing activities, Polman
is also making sure that former CEO
Cescaus commitment to
corporate social responsibility is
maintained. Summarizing his views on
sustainability and environmental impact,
Polman said:
. . . the road to well-being doesnt go
via reduced consumption.
It has to be done via more responsible
consumption. . . . So
thats why were taking such a stand on
moving the world to
sustainable palm oil. Thats why we go to
natural refrigerants
for our ice-cream cabinets. Thats why we
work with small-hold
farmers, to be sure that people who dont
have sufficient nutrition
right now have a chance to have a better
life. Because at
the end of the day, I think companies that
take that approach
have a right to exist.
Discussion Questions
1.If a company such as Unilever has to make trade-offs
between
being a good corporate citizen and making
a profit, which
should be the higher priority?
2.Assess Cescaus response to the Greenpeace palm-oil
protest.
Was it appropriate? What type of
relationships should Unilever
cultivate with Greenpeace and other NGOs
in the future?
3.Do you think that a streamlined management structure and
emphasis on emerging markets will enable
new CEO Paul
Polman to lead Unilever to improved
performance?
Sources:Louise Lucas, Growing Issue for Palm Oil Producers,Financial Times(May 23,
2011), p. 22; Ellen Byron, Unilever Takes
On the Ugly Underarm,The Wall Street
Journal(March 30, 2011), p. B1; Lucas, Investors Skeptical as
Unilever Pursues Bold
Growth Plan,Financial Times(November 16, 2010), p. 20; Stefan Stern,
The Outsider
in a Hurry to Shake Up His Company,Financial Times(April 5, 2010); Jenny Wiggins,
Unilever Vows to Focus on Cheaper Products,
Financial Times
(August 7, 2009), p.
17;
Wiggins, Unilevers New Chief Prepares to
Brew Up Changes,Financial Times
(February 6, 2009), p. 15; Michael
Skapinker, Taking a Hard Line on Soft Soap,
Financial Times(July 7, 2008), p. 12; Aaron O. Patrick,
After Protests, Unilever Does an
About-Face on Palm Oil,The Wall Street Journal(May 2, 2008), p. B1..jpg”>Read the Case (p.524) Unilever and answer the Unilever: The AssignmentAfter Cescau was elevated to the top job, Unilevers board streamlinedthe companys management structure. Now
there is a singlechief executive; previously, there had
been one in Rotterdam and onein London. Cescau asserted that, with a
single chief executive, theneed for consensus was replaced by speed
at making decisions. Asnoted, many of those decisions concerned
doing good. However,some observers were skeptical of Cescaus
determination to operationalizea responsible business philosophy. Cescau
recalled, Thecompany was not doing well. There was an
article saying that I wasdraping myself in a flag of corporate
social responsibility to excusepoor performance. I was so angry with
that.Cescaus commitment was put to the test in
2008, his final year asCEO. Greenpeace launched an advertising
campaign alleging thatUnilevers purchases of Indonesian palm
oil were contributing torainforest destruction. Palm oil, a key
ingredient in Doves beauty bar,comes from oil palm trees that grow in
Indonesia and Malaysia. Risingworld prices for the commodity prompted
Indonesian farmers to cutdown large swaths of old-growth rain forest
and plant fast-growingoil palms. Specifically, Greenpeace
identified the operations of SinarMas, an Indonesian company that is a major
palm oil supplier, ascontributing to deforestation.The media strategy for the Greenpeace
campaign included newspaperads in London and a video on YouTube.
Fliers parodiedUnilevers Campaign for Real Beauty; for
example, they showed picturesof orangutans juxtaposed with the headline
Gorgeous orgone? John Sauven, executive director of
Greenpeace, explainedwhy his organization had targeted
Unilever. Everyone has heard ofthose brands. They are the public face of
the company.Cescau responded by calling for a
moratorium on rain forestdestruction by Indonesian oil producers.
The Unilever chief alsopledged that his company would only buy
palm oil from producerswho could prove that the rain forest had
not been sacrificed in theproduction process. The move allied
Unilever with the Roundtable onSustainable Palm Oil (RSPO), an
organization that certifies palm oilproducers. A Unilever spokesperson also
indicated that the proposedchange in Unilevers palm-oil sourcing
strategy had been in the worksfor months. Nevertheless, Greenpeace and
other nongovernmentalorganizations claimed victory.Unilever brought its message to the public
with a print ad campaignfeaturing the headline What you buy in
the supermarket canchange the world. The body copy outlined
Unilevers pledge that by2015 all our palm oil will come from
sustainable sources. The adsended with the tagline Small actions, big
difference.Doing well is also part of the
leadership equation at Unilever.Cescau understood the importance of
improving Unilevers profitability.To this end, he continued a restructuring
drive that was initiated by hispredecessor, co-chairman Niall FitzGerald.
Specific actions includedreducing Unilevers bureaucracy by
removing several managementlayers. Cescau also reduced the top
management head count from25 people to 7 and narrowed the vertical
distance between managementand marketing. The company also shed
hundreds of brandsand closed dozens of factories in France,
Germany, and elsewhere. InCescaus view, the new, leaner structure
would translate into morerapid response to changing market trends
and consumer preferencesand ensure quicker rollouts of new
products.Cescau also bet heavily on emerging
markets to jump-start salesgrowth. Rising incomes mean that many
people are purchasingconsumer packaged goods for the first
time. One scenario: As increasingnumbers of people in developing countries
buy their first washingmachines, they will need to buy laundry
detergent. To capitalize on suchtrends, Cescau shifted budgetary resources
out of mature markets suchas Europe; those funds were used to
support research in India and otheremerging markets. Brand managers were
instructed to innovate bytaking a clean slate approach to
developing new products for emergingmarkets. As Steph Carter, packaging
director for deodorant brands,noted, Traditionally, we would have taken
existing products andthen tried to fathom how to adapt them for
the developing world.Our thinking has changed.The Polman Era BeginsPaul Polman took over as CEO in January
2009; a former Nestlexecutive, he is the first outsider to
lead Unilever in its 80-year history. Inhis first months on the job, Polman
initiated a shift in Unilevers corestrategy. In the past, the company
generated sales growth by increasingprices. Noting that this was the wrong
strategy for recessionary times,Polman said the new priority would be to
increase sales volumes. Thechange entailed some risk: holding the
line on prices could put pressureon margins, given the trend of rising
costs for the agricultural commoditiesthat are key ingredients in Unilevers products.Polman was also keenly aware that many
budget-conscious shopperswere choosing less-expensive private-label
supermarket productsinstead of well-known name brands. Polman
vowed to improve productquality across the board and to boost
marketing and advertisingspending. To support the increased
investment, he accelerated some ofthe cost-cutting measures that his
predecessor had initiated. Forexample, the timetable for planned factory
closures and job cuts wasmoved up; Polman also froze executive
salaries and changed the bonuspolicy. He established 30-day action plans
for managers of brandswith flagging sales. He also replaced
about one-third of Unilevers top100 executives, including the chief
marketing officer.When it comes to demonstrating Unilevers
commitment to itscustomers, Polman sends clear signals to
his employees. He spendsabout 50 percent of his time on the road,
with regular stops in Asia,Latin America, and, of course, Europe. In
a recent interview, he noted,Theres not one visit in a country when I
dont meet a consumer. Ifwe want to make this company passionate
about consumers andcustomers, the example starts at the top.That passion is evident in a flurry of
marketing activities orchestratedby Polman. One is the quick pace of
new-product rollouts,especially in emerging markets. For
example, Unilevers home careunit was first-to-market with liquid
laundry detergent in China; it alsointroduced a dishwashing liquid in Turkey
in less than 30 days.Innovation has also become a key element
for shoring up the valueproposition of Unilevers brands, with
existing brands such as Surflaundry detergent getting an upgrade in
the African market.Driving growth in the personal care
category is another priority forPolman. By itself, the global deodorant
segment represents an estimated$17 billion in annual sales. To tap into
that market, the Dove brand hasbeen extended to mens products. Dove for
Men has been rolled out indozens of countries. Meanwhile, Doves
product managers devised anew strategy for persuading women to
switch deodorant brands. DoveUltimate Go Sleeveless resulted from
company research designed todiscover insights about consumer attitudes
towards underarms. Whatthe researchers learned is that 93 percent
of women think their armpitsare not attractive. Dove Ultimate Go Sleeveless is formulated withmoisturizers that, the company claims,
will result in nicer-lookingunderarms after just a few days use.The ice cream and beverage unit is also on
the move. UnileversMagnum brand premium ice cream bars are
the worlds top-selling icecream novelty. Although Magnum enjoys
great popularity in Europe, itwas not introduced in the United States
until 2011. Hagen-Dazs andMars are already entrenched in the market;
undaunted, the Magnummarketing team is confident its brand will
stand out. One managerexplained that an important part of the
brands equity is the loudcracking sound heard when someone bites
through Magnums thickchocolate shell.Even as he oversees these and other
marketing activities, Polmanis also making sure that former CEO
Cescaus commitment tocorporate social responsibility is
maintained. Summarizing his views onsustainability and environmental impact,
Polman said:. . . the road to well-being doesnt go
via reduced consumption.It has to be done via more responsible
consumption. . . . Sothats why were taking such a stand on
moving the world tosustainable palm oil. Thats why we go to
natural refrigerantsfor our ice-cream cabinets. Thats why we
work with small-holdfarmers, to be sure that people who dont
have sufficient nutritionright now have a chance to have a better
life. Because atthe end of the day, I think companies that
take that approachhave a right to exist.Discussion Questions1.If a company such as Unilever has to make trade-offs
betweenbeing a good corporate citizen and making
a profit, whichshould be the higher priority?2.Assess Cescaus response to the Greenpeace palm-oil
protest.Was it appropriate? What type of
relationships should Unilevercultivate with Greenpeace and other NGOs
in the future?3.Do you think that a streamlined management structure andemphasis on emerging markets will enable
new CEO PaulPolman to lead Unilever to improved
performance?Sources:Louise Lucas, Growing Issue for Palm Oil Producers,Financial Times(May 23,2011), p. 22; Ellen Byron, Unilever Takes
On the Ugly Underarm,The Wall StreetJournal(March 30, 2011), p. B1; Lucas, Investors Skeptical as
Unilever Pursues BoldGrowth Plan,Financial Times(November 16, 2010), p. 20; Stefan Stern,
The Outsiderin a Hurry to Shake Up His Company,Financial Times(April 5, 2010); Jenny Wiggins,Unilever Vows to Focus on Cheaper Products,
Financial Times
(August 7, 2009), p.
17;Wiggins, Unilevers New Chief Prepares to
Brew Up Changes,Financial Times(February 6, 2009), p. 15; Michael
Skapinker, Taking a Hard Line on Soft Soap,Financial Times(July 7, 2008), p. 12; Aaron O. Patrick,
After Protests, Unilever Does anAbout-Face on Palm Oil,The Wall Street Journal(May 2, 2008), p. B1..jpg”>

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