Sidetracked on a Path to Growth

A scorecard marked nine-and-a-quarter out of ten – that is Niall FitzGerald’s own immodest verdict on his performance as head steward of Unilever. As an assessment, it sits uncomfortably with yet more grim news about Path to Growth’s disappointing performance, juxtaposed with the announcement that FitzGerald himself is to step down early from the top job, after 37 years’ service at Unilever.

Of course, there’s no denying FitzGerald’s considerable achievements. Anyone who has presided over annual profits growth of ten per cent, doubled margins and trebled cash flow deserves a bit more than a pat on the back and a gold watch. It doesn’t end there, either. More than anyone since Lord Leverhulme, Fitz Gerald has personified and culturally transformed the company he has led. It has ceased to be a rather stuffy, bureaucratic Anglo-Dutch club with an interesting medley of international brands and become instead a global brand powerhouse that happens to be one of the few British companies (and fewer Dutch – see Shell) which has made a successful debut on the world stage.

In the process, he has been hailed as a marketing icon, not least by this magazine. Good going for someone who is an accountant by training, and who presided over one of the greatest marketing disasters of all time. Yet the acclamation is easily justified. Sure, Persil Power was a big mistake, but it also demonstrated two of FitzGerald’s principal qualities: a willingness to take risks and an ability to learn from experience. He grasped better than anyone else that marketing was the wellspring of Unilever’s success and he championed it from the top of the company. It’s a marketer’s dream, too little emulated elsewhere.

But how should we assess his central legacy, Path to Growth? Was it flawed simply because (in the City’s opinion) he made ‘naive’ optimistic judgements about achievable growth targets, or are there deeper-rooted problems associated with the very concept of the power-brand strategy? It must have been easier to manage and control Path to Growth in its earlier years, simply because phase one relied largely on cost-cutting and pruning non-essential brands. But as the brands are whittled down to the target number of 400 (there were 1,700; there are now fewer than 540), so the tightrope trick becomes harder to perform. Critical appraisal is going to focus increasingly on how the remaining power brands are growing organically, and less and less on the efficiency of the restructure. Which is rather unfortunate for the food and prestige fragrances divisions, where sales have been distinctly lacklustre.

Unilever’s recent failure to please is backlit by the apparent success of other corporate power-brand strategies, notably those of Reckitt Benckiser, Colgate-Palmolive and Procter & Gamble. But the inference that Unilever is a special case which has mismanaged its brief may be misleading. It could simply be that Unilever is further down the cycle of reform than the rest of the fmcg pack, and that they, too, will encounter strategic problems later. How well do power brands actually work?

Either way, the verdict will be of little comfort to FitzGerald. Short of ultimate success, his legacy will be best enshrined in the company’s new mission statement: ‘Vitality’.

News, page 6; Cover Story, page 26

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