Unilever is correct to Make a Break From Laundry
Unilever is correct to Make a Break From Laundry
Unilever is correct to Make a Break From Laundry
Unilever's decision to sell its North American laundry care business and focus instead on growing its core brands is a smart one, experts say.
The Anglo-Dutch consumer packaged goods giant this week announced that it has sold its All, Snuggle, Wisk, Surf and Sunlight brands to global private equity firm Vestar Capital Partners for $1.08 billion in cash.
Unilever rep Anita Larsen said that while the decision was a tough one, the move was necessary to allow the company to concentrate on expanding its key brands. "We simply did not have the scale here in the North American laundry business to allow us to continue to grow," she conceded.
Dean Hillier, a partner with A.T. Kearney's consumer retail practice, said the acquisition marks a significant step in the company's overall plan to divest itself of "nonstrategic" brands. Unilever's laundry care unit resulted in $1 billion in turnover for the company last year.
On the flip side, some of Unilever's most successful brands include frozen treats like Breyers, which was second only to a private label with $615.2 million in sales last year, per Brandweek's Superbrands 2008 report. Other top performers include Unilever's Dove brand, which grew from a soap-only line to a product category that now ranges from shower gels to deodorants to haircare products. In the shampoo category, for instance, Dove bested P&G's Clairol Herbal Essences with $29.8 million in 2007 sales, per Superbrands.
"If anything, this will help [Unilever] focus [its] attention on where they're more powerful," Hillier said. "The laundry segment inNorth America is tough. It's loaded with private label and it's become harder for branded folks to really differentiate their products, compete and make money."
Unilever is not the only company to take such measures. In recent years—fueled by a burgeoning recession and tighter ad and marketing dollars—the CPG industry as a whole has seen a shift in brand ownership as private label store brands surged to the forefront. ConAgra, for instance, announced last week that it was selling its Pemmican beef jerky brand to Brazil-based Marfrig Group, as part of a five-year sales and distribution agreement. Kraft, similarly, relieved itself of lackluster-performing Post cereal line in a deal valued at $1.7 billion with Ralcorp Holdings last November.
"The bigger companies are now looking to shed any brand that isn't the leader in their category. No. 1: thumbs up. No. 2: ditch," said Chris Bragas, CEO of Eastwest Marketing Group,New York
Unilever broke the mold somewhat by choosing to get rid of an entire division. While that may seem like a huge loss for the company, the strategy positions Unilever for a greater return on investment, Hillier said.
"A lot of companies look at what we call the 'tail of their product lines' and start cutting from there," he said. "Unilever has been very wise to bundle it and sell off almost the whole category inNorth America , where the market is very tough, and focus their strengths on where they've got the resources, and we've been encouraging more CPGs to do that."
For Jim Wisner, president of Wisner Marketing Group inLibertyville , Ill.
"They're struggling to get ahead of a market leader, but they're getting clobbered on the price side by the increasing effectiveness of store brands," Wisner said.
A slide presentation obtained from Unilever showed that the company saw itself as a leader in categories like ice cream, tea and spreads, but took second place in sectors like laundry and daily haircare. In 2007, ice cream brought in $10.4 billion for the company, savory dressing brought in $19.1 billion, while All detergent only reaped in $228.9 million in sales, per Unilever and IRI data.
P&G, on the other hand, has been able to maintain the upper edge over competitors like Unilever while fighting off private label by continuously seeking innovation in product launches, Wisner said. Earlier this month, for example, P&G announced it was introducing a line of laundry and fabric softeners, called Tide and Downy Total Care, made from beauty care products. Measures like these have made it much more difficult for smaller competitors seeking a larger share of the pie.
"It used to be that you could roll of quite comfortable as a second-place national brand. Not anymore," said Wisner. "The middle is a terrible place to be [in] right now."
The Anglo-Dutch consumer packaged goods giant this week announced that it has sold its All, Snuggle, Wisk, Surf and Sunlight brands to global private equity firm Vestar Capital Partners for $1.08 billion in cash.
Unilever rep Anita Larsen said that while the decision was a tough one, the move was necessary to allow the company to concentrate on expanding its key brands. "We simply did not have the scale here in the North American laundry business to allow us to continue to grow," she conceded.
Dean Hillier, a partner with A.T. Kearney's consumer retail practice, said the acquisition marks a significant step in the company's overall plan to divest itself of "nonstrategic" brands. Unilever's laundry care unit resulted in $1 billion in turnover for the company last year.
On the flip side, some of Unilever's most successful brands include frozen treats like Breyers, which was second only to a private label with $615.2 million in sales last year, per Brandweek's Superbrands 2008 report. Other top performers include Unilever's Dove brand, which grew from a soap-only line to a product category that now ranges from shower gels to deodorants to haircare products. In the shampoo category, for instance, Dove bested P&G's Clairol Herbal Essences with $29.8 million in 2007 sales, per Superbrands.
"If anything, this will help [Unilever] focus [its] attention on where they're more powerful," Hillier said. "The laundry segment in
Unilever is not the only company to take such measures. In recent years—fueled by a burgeoning recession and tighter ad and marketing dollars—the CPG industry as a whole has seen a shift in brand ownership as private label store brands surged to the forefront. ConAgra, for instance, announced last week that it was selling its Pemmican beef jerky brand to Brazil-based Marfrig Group, as part of a five-year sales and distribution agreement. Kraft, similarly, relieved itself of lackluster-performing Post cereal line in a deal valued at $1.7 billion with Ralcorp Holdings last November.
"The bigger companies are now looking to shed any brand that isn't the leader in their category. No. 1: thumbs up. No. 2: ditch," said Chris Bragas, CEO of Eastwest Marketing Group,
Unilever broke the mold somewhat by choosing to get rid of an entire division. While that may seem like a huge loss for the company, the strategy positions Unilever for a greater return on investment, Hillier said.
"A lot of companies look at what we call the 'tail of their product lines' and start cutting from there," he said. "Unilever has been very wise to bundle it and sell off almost the whole category in
For Jim Wisner, president of Wisner Marketing Group in
"They're struggling to get ahead of a market leader, but they're getting clobbered on the price side by the increasing effectiveness of store brands," Wisner said.
A slide presentation obtained from Unilever showed that the company saw itself as a leader in categories like ice cream, tea and spreads, but took second place in sectors like laundry and daily haircare. In 2007, ice cream brought in $10.4 billion for the company, savory dressing brought in $19.1 billion, while All detergent only reaped in $228.9 million in sales, per Unilever and IRI data.
P&G, on the other hand, has been able to maintain the upper edge over competitors like Unilever while fighting off private label by continuously seeking innovation in product launches, Wisner said. Earlier this month, for example, P&G announced it was introducing a line of laundry and fabric softeners, called Tide and Downy Total Care, made from beauty care products. Measures like these have made it much more difficult for smaller competitors seeking a larger share of the pie.
"It used to be that you could roll of quite comfortable as a second-place national brand. Not anymore," said Wisner. "The middle is a terrible place to be [in] right now."
Boutique executive search services with best in class global network, contacts and market mastery.
Deeply connected and engaged personal service approach, long-term investment in client community and 25 year history of strong relations with both Multi-National leaders and Private Equity partners.