Five months ago Unilever moved its personal care subsidiary, Elida Fabergé’s headquarters to the HQ of its detergent subsidiary Lever Brothers in Kingston, insisting that it was merely an “administrative” measure. The two companies would remain separate entities, it said. Last week, the fmcg giant switched four soap brands from Lever to Elida, signalling that rationalisations are taking place.
The move was passed off as a by product of the global review of Unilever business initiated by chairman elect Niall Fitzgerald. Unilever, faced with spiralling costs and a squeeze on margins in most of its leading detergents and home care brands, needed to cut costs.
Sources close to the company say Fitzgerald was faced with two options. The first was to merge the Elida Fabergé and Lever Brother’s businesses, axing yet more sub-brands and cutting staff. The second option, which appears more feasible, is to sell one of the businesses.
City sources say Unilever has had discussions with interested parties, such as German soap company Henkel and Japanese chemical giant Kao Corporation, about the possible sale of Lever Brothers. The decision to switch personal soap brands such as Dove, which are produced at separate factories to other Lever brands would indicate that such a move is likely.
While Lever Brothers has suffered the glare of the unwanted media spotlight with Persil Power, its personal care cousin has avoided media scrutiny, quietly developing global brands.
When Lever announced the transfer of Lux, Dove, Shield, Lifebuoy and Knight’s Castile, it omitted to mention that among them were Lever’s only remaining global brand names.
Unilever’s long-term strategy is to develop global brands. Of the two divisions, Elida has stronger global brands with Impulse, Organics, Timotei, Pears and now Lux, and Dove . Lever, on the other hand, now has no global brands.
However, if Unilever decides to quit the troubled detergents market to concentrate on personal care where margins are tighter, its problems won’t go away.
Like its detergents cousin, Elida has also been hit by over-competition. Own-label launches in the deodorant, toothpaste and shampoo markets have cut margins.
The company has struggled to change its profile from a mass-market toothpaste and shampoo producer, with Gibbs SR and Sunsilk as lead brands, and develop a premium image. There are rumours that it may pull out of the toothpaste sector altogether.
Last year, it symbolically ditched the Gibbs name to become Elida Fabergé (MW January 26) and give its brands a more upmarket feel among consumers and in the City.
Observers suggest Elida should consider dispensing with some of its secondary brands to concentrate on innovation in its primary ones.
Martin Perry, client services director at ad agency Milton Healthworld, says the company needs to get rid of brands such as Brut, Knight’s Castile and Sunsilk that have small market share and are costly to run.
The more recent brands, such as Lynx and Organics, which also have a higher profile, need investment if they are to maintain or increase share. Perry says although the technology of shampoos such as P&G’s Pantene ProV and Organics was novel when the brands were launched, further product innovation is necessary to bolster market share.
Although the Lynx male brand – called Axe in Europe – is strong in the UK, it has potential among older twenty-something men and as a premium product. Traditionally it appeals to younger men who switch brands as they get older.
Several of the Lever Brothers soap brands, which moved to the Elida business, will benefit from a more upmarket image. The most prominent, Dove and Lux, already have considerable brand equity. Lever has begun to position Lux in the premium sector with the launch of a global ad campaign last year featuring Paul Newman.
Elida has a record of launching new brands. Compared with Lever Brothers, whose only significant launch in the past 20 years was Radion in 1989, Elida has developed several new brands. These include Impulse (1979), Timotei (1981), Lynx/Axe (1983), and Organics (1995).
However, in the innovations-led personal care market, many of the relatively new brands that Elida has launched have been me-too products.
Both Lever Brothers and Elida Fabergé have suffered from the Unilever bug of unsuccessful product innovation. Lever was beaten to market in compact detergents in the late Eighties by P&G’s Ariel Ultra followed by its catastrophic attempt to beat its rival to market with Persil Power in 1994. Elida was also stamped on in the shampoo sector by P&G’s Pantene.
In an attempt to innovate, Elida Fabergé is running a trial in East Anglia for a concentrated spray deodorant called Sure Micro Granules. If successful, Elida will roll it out nationally. Elida is hoping to do to the deodorant market what P&G’s Ariel Ultra did in laundry wash.
If new Sure doesn’t let Elida down, the company could play a much more significant role as Unilever’s lead subsidiary realising its new global branding vision.