Unilever is putting its biggest global brands at the forefront of its innovation strategy as it looks to battle a challenging and “fast changing environment” following political instability caused by the US elections and the EU referendum.
In the company’s first half, turnover decreased by 2.6% year on year, but net revenue increased 2%. Consumer demand “remained weak”, it said, and market volume growth was negative in both Europe and North America.
Speaking on an investor call this morning (21 July), Unilever CEO Paul Polman said the company is in the process of transforming to be “more resilient and agile” as it battles global political instability. He believes, however, that Unilever is “well placed” to overcome these challenges.
“This is a fast changing environment. And with the political and economic conditions being more difficult almost everywhere due to the US elections and the Brexit referendum result, consumer demand in the developed world is down. In Europe it is now likely to deteriorate further following Brexit,” he said.
“It is also a very stimulating environment, and one which Unilever is well placed to win in. We have global scale but deep roots in local culture. But we need to work twice as hard as [we did] five or 10 years ago.”
To ensure its growth, Unilever wants to “step up the scale and pace” of its innovations. It plans to do this by increasing its focus on social purpose and speeding up product launches globally. Now that 70% of its portfolio is available worldwide, the FMCG giant is hoping to cut roll-out times by up to a third.
“Innovation is the lifeblood of any business. We want to be bigger, better and faster than before. At the forefront of this will be our top global brands. More of them are building social purpose into their essence, building brand equity and thereby also growing share. Getting the strong brands to be even stronger in this challenging environment is more important than ever,” he said.
Polman highlighted Dove as a “great example” of this strategy. Even though it has focused on raising the self-esteem of women “for many years”, the brand’s social purpose has created “tremendous loyalty” among female consumers and sales were up 6% in the first half of the year.
Using new models to increase agility
During the call, Unilever’s chief financial officer Graeme Pitkethly also spoke about key initiatives Unilever is implementing in a bid to strengthen the organisation and make it more agile, including zero-based budgeting and its new “functional model” ‘Connected 4 Growth’. The company believes both models will provide Unilever with €1bn (£834m) in savings by 2018.
“Zero-based budgeting will help us identify the next efficiencies and costs that don’t add consumer value. It’s essential to underpinning our strategy.”
Graeme Pitkethly, CFO, Unilever
Unilever’s CMO Keith Weed recently spoke to Marketing Week about the new zero-based budget model, in which marketing teams justify spending on all new brand activity rather than budgets being based on the previous year’s spend, calling it “a very good discipline” and “only an advantage”.
He said: “Marketing is a big part of what we do; we’re the second largest advertiser in the world. While we always had discipline for planning and budgeting, [zero-based budgeting] is about looking at the budget with fresh eyes. We found it very helpful in better understanding our budgets now and going forward.”
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