Unilever Core Brands Marketing Boost Planned; Personal Care Sales Up 7%

Unilever worldwide personal care sales increased 7% to $11.8 bil. at constant exchange rates in 1999 as the company prepares to implement a series of strategic initiatives to build top-line growth and drive margins.

Personal care revenues for the fourth quarter were $3.16 bil., up 10% from the prior-year period. Operating profit for 1999 rose 24% to $1.75 bil., while profit for the three months jumped 26% to $486 mil.

In North America, Unilever attributed the 5% home and personal care volume increase to its fast-growing deodorant business, which includes the Sure and Degree brands. Dove strengthened its leading position in personal wash, while hair care products were "outstanding performers," Unilever said.

The "successful launch" of the company's Take Control cholesterol-reducing spread was cited as one highlight within the North American foods business. The product, which competes with McNeil Consumer Healthcare's Benecol line, "has now taken leadership of that category," Unilever maintained.

Four of Unilever's worldwide personal care product categories - antiperspirant/deodorant, mass market skin care, hair and personal wash - generated high single- to low double-digit sales increases from 1997 to 1999, the firm reported during an analyst presentation Feb. 22.

Antiperspirant sales, for example, increased 12% from 1997 to 1999, with sales for the leading three brands up 11%, the company reported.

Unilever plans to retain its core - and most familiar - personal care brands while divesting or phasing out underperforming products. Under the streamlining announced last year, the firm will focus on 400 brands chosen on the "basis of the strength of their current consumer appeal and their prospects for sustained growth" (¹ ).

Leading brands are considered those typically ranked number one or two in the market and have "clout with customers," "brand appeal" or "brand scale," Unilever said. The 400 brands account for 90% of Unilever's sales and more than 90% of its profits.

"Concentrating on 400 brands will give us the opportunity to focus resources where they can be most effective, reduce overheads and streamline the corporate center," Unilever maintained.

The company's top 50 brands generated sales growth of 5% from 1997 to 1999, Unilever said, while the top 51-200 brands grew 4% and the top 201-400 brands jumped 10%. Sales for the so-called "tail" brands, however, declined 1%. Of the underperforming brands, 6% are in the home and personal care business segment and the majority (94%) are in foods.

Although final decisions on the future of all Unilever brands have not yet been made, the company is "fairly confident" Mentadent, Close-Up and Pepsodent oral care products and Degree, Suave and Brut deodorant/ toiletry brands will be retained as core products.

Unilever will allot an additional $1.6 bil. in marketing support over the next five years to those products that remain in its portfolio. The company spent $5.76 bil. on advertising and promotions in 1998. The additional investment is expected to result in a 6% annual growth rate among core brands by 2004.

The remaining 1,200 non-core brands, most of which are sold outside the U.S., either will be reorganized, divested, phased out or folded into other businesses.

Internet initiatives will be infused with an additional $210 mil. Unilever has established alliances with AOL, Microsoft, Excite@Home and WOWGO.

The streamlining effort is expected to result in an annual top-line growth of 5% and a 15% operating margins increase by 2004. Annual savings should reach $1.6 bil. within five years, Unilever said. Restructuring is expected to cost about $5.3 bil. The firm will cut an estimated 25,000 jobs, or about 10% of its work force, in Europe and the Americas over the next five years.

In addition, approximately 100 of the firm's 350 manufacturing plants will close, with the remaining facilities integrated into regional networks. "State-of-the-art, cutting-edge" equipment and systems processes will be implemented in the roughly 150 remaining locations.

Unilever's restructuring program is similar to Procter & Gamble's Organization 2005 effort, under which P&G cut 13.6% of its work force, standardized production lines and restructured its management team (² (Also see "P&G North America Aims To Add Up To $7.5 Bil. In Sales In Next Decade" - Pink Sheet, 14 Jun, 1999.)).

Unilever's total North American sales for the year saw a slight 1% increase to $9.41 bil. at constant exchange rates. Consolidated sales increased 2% to $45.79 bil. while net earnings decreased 5% to $3.09 bil.