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Unilever: Mission or Margin?
Unilever is an old margarine and soap company that grew into one of the world's largest consumer goods firms on the back of one lofty goal: to make its brands famous around the world.
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But as the company embraced a bold new vision to link its brands to social and environmental purposes, it sparked both admiration and skepticism.
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Now, with a new CEO at the helm, the company faces a pivotal choice.
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​Two paths lie ahead. One with a mission-driven heart, the other with a no-nonsense, back-to-basics approach.
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In this month's Strategy Standoff, will Unilever stay the course, continuing to champion social purpose? Or will it return to its roots, focusing on the fundamentals of product, price, and performance?
In the last few years, Unilever linked all its brands to social purposes. Under its Sustainable Living Model, they said brands attached to social purpose drove 75% of their growth. Seven of Unilever's top ten brands, including Dove, Knorr, and Hellmann’s, were touted as examples.
However, skeptics in the analyst community pointed to Unilever’s poor share price and total shareholder return. Meanwhile, Hellmann’s mayonnaise had a mission to inspire resourcefulness (reduce food waste).
One scallywag suggested the purpose of mayonnaise might just be to make sandwiches taste better!
This week’s Strategy Standoff:​
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In 2023 Unilever hired a new CEO, Hein Schumacher. He faced a strategic decision: should Unilever maintain the purpose-first approach driving growth or should it revert to traditional brand management and keep the analysts happy?
The Strategy Standoff
Strategy A: Push For Purpose
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Persist in attaching a social purpose to all Unilever brands.
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Younger customers in rich markets care about a company's social and environmental stance. Purpose-led brands are behind most of the sales growth at Unilever. And the success of campaigns like Dove Real Beauty show how purpose creates brand differentiation.
What’s not to love? On the other hand, do Unilever's consumers in developing markets care about purpose, and does this approach neglect the basics of marketing that were the foundation of Unilever for a century?
Strategy B: Branded Basics
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Branded Basics – return to 4P basics (product, packaging, price and positioning)
Unilever could refocus on product attributes (taste, quality), innovation, distribution, and price as drivers of consumer choice. This move might quieten the analysts crowing about purpose fatigue but it might alienate consumers who prefer brands aligned with their personal values.
This approach would also mean walking away from the growth formula they discovered and a middle finger to the old executive team and CEO.
So, Which Did They Choose?
Cast your vote to find out!
Better luck next time, Strategy B was chosen!
Good Job, Strategy B was chosen!
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But how will this work out for Unilever...
Expert Facilitator Commentary By Matt
Matt Braithwaite-Young
Managing Partner
t +61 2 9002 3100
Blue U refocuses on brand fundamentals
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Under the leadership of Hein Schumacher, Unilever will now return to a more traditional approach to brand management. It will eschew the mandatory-social-purpose for every brand approach and allow it more on a “when it really fits” basis.
Herr Schumacher talks about “high-quality sales growth” and says he wants to "do fewer things, better.”
Translation: I am not buying the magic purpose beans.
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Putting product performance and market research back at the forefront, Schumacher thinks Unilever can then compete head-on with peers like Procter and Gamble by emphasizing awareness and customer relevance over a strict ESG (Environmental, Social, Governance) agenda.
​ESG consultants aghast
As you'd expect, an army of ESG consultants are beside themselves, having used Unilever as the poster example for many programs and their proprietary frameworks and signalling models (such as B Corp certification).
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Shumacher went to pains to point out Unilever would always be a good corporate citizen, and that it’s ESG efforts could even benefit from a focus on fewer bigger wins – such as reducing packaging volume.
He says the company isn’t abandoning its commitment to responsible business—just being more selective and realistic about where it can have the most impact. In some instances, brands were over-reaching and setting goals to change consumer behaviour in the household. Now they will concentrate on the areas they have direct impact through their business.
Not the end for being a good corporate example
I think Unilever is pretty genuine about its citizenship and role in helping with social causes. When I worked there in the late 90s and early 2000s, they had a lot of excellent programs in ESG and it was well before it was in vogue. For example, they had a successful marine stewardship program to protect North Sea fisheries. This was also self interest because at the time they had a large fish business (John West in Australia and Birds Eye in the UK). Frankly, self-interest is helpful to align incentives and reduction in packaging and energy usage is a great example of a more modern win-win.
You might also be interested to know Schumacher is planning to sell the Streets ice cream business globally.
While it is a bit of a shock, he's probably right to point out ice cream is a different kind of business to mainstream grocery, and it would probably be worth more, and be more successful, with a different owner who could allocate capital specifically for the type of (seasonal and high-capital) business it is.
Prior to Schumacher's reign, Unilever had already sold off it’s Lipton tea business and Flora margarine in favour of vitamin powders and other high growth categories. I think they will regret that in time. Food staples might not be sexy like the hydration powders company they just bought (seriously!) but they provide good quality and stable annuity incomes to an owner like Unilever. I think they'll regret not having the diversity in categories they have given up.
But that might be nostalgia for me because my first job was at Unilever in the tea department and it was, and I presume still is, a fantastic business with a great culture and smart people. I even met my wife at the Blue U.
Are you like Hein? Does your business need to re-look at old strategies?
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If so, don’t do it alone, get your top team together and get aligned on a way forward.
At Turning Leaf we have helped almost every industry. Our speciality is the process of considering and setting great strategy – as a team. We have facilitators available in every state of Australia.
We work with start-ups, scale ups, government departments and multinationals – and everything in between.
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