MARKETING STRATEGY SPECIAL... Unilever Now Takes HUL Strategies to First World

Unilever Now Takes HUL Strategies to First World 

Offers smaller packs, cheaper variants, single serves for developed mkt’s recession-hit consumers

During a 2009 India visit, Paul Polman, CEO of Anglo-Dutch consumer goods major Unilever, couldn’t conceal his delight with the Indian subsidiary’s strategy of offering brands with multiple price and packaging options, helping consumers trade down or up depending on the state of the economy.

“If we had that (such options) in the United States, there is no reason why we would be hit in a recession. We have seen that we tend to do well in markets that have a wide portfolio of brands in a category. So, we are trying to do the same in other markets,” Polman had said.

Three years on, the Unilever CEO’s words are ringing true in developed markets. The home & personal care and foods giant is now dipping into the sales strategies being deployed by outposts in developing and emerging (D&E) markets, such as India’s Hindustan Unilever Ltd (HUL), to appeal to recession-ravaged consumers in the US and Europe. These include selling smaller pack sizes, affordable variants of best-selling brands for the developed world’s bottom of the pyramid consumer, and single-serve sachet variants. Company officials say consumers in developed markets plagued by unemployment and shrinking disposable income are displaying similar habits of thrift as those in developing markets.

The maker of brands such as Axe, Dove, Knorr and Lipton is selling small packs of its brands in markets such as Spain, Greece and the US. In Spain, for instance, Unilever sells Surf detergent in packs offering five washes, and offers mashed potatoes and mayonnaise in small packages in Greece. It has also launched a low-cost brand for tea and olive oil for the euro markets.

Confirming the move, a Unilever spokesperson said: “We have ‘reverse-engineered’ products from D&E markets — where we have big, long-established businesses — starting with a price point that people can afford and then working our way backwards along the supply and manufacturing chain to make sure that we can make it a profitable business model. We know that this works as a way of meeting the needs and aspirations of consumers who struggle to make ends meet — be that through low-price sachets of shampoos or basic bouillons.”

Across Europe, Unilever has noted that the recession drives more consumers to packed lunches and home-baking. The company has now introduced new baking products like Stork baking liquid as an option to the more expensive butter as well as in packs that can be re-used as lunch boxes. The spokesperson also points out that Unilever runs marketing campaigns on mayonnaise that seek to inspire people to make the most of their leftovers. “Groups of consumers see value differently. The ‘cash strapped’ are really about spending the least out of pocket as possible; whilst ‘smart shoppers’ might be looking for the best price per portion; and ‘bargain hunters’ the best possible promotional deal,” explains the spokesperson.

One way Unilever is trying to meet consumer needs is by positioning specific brands as value-for-money alternatives. Example: the spreads portfolio has ‘I can’t Believe it’s not Butter’ in the United Kingdom, Homa in Germany and Delma in Poland. Unilever is also rolling out Saga, a strong value-for-money tea brand in central European markets.

The consumer goods giant has also dramatically increased the number of products that retailers can choose to sell at a €1 or £1. In tea, for instance, there’s PG Tips One-Cup and in dressings there’s a 450-mg jar of Hellmann’s Salad Mayonnaise. Within the Knorr Bouillon range, Unilever has launched Knorr Economica with an entry-level stock cube that’s priced some 60% lower than the normal line.

Another strategy involves offering more at an affordable price: like ice-creams in mega packs, large jars of mayo, and PG Tips in ‘240 Tea Bag’ formats.

Much of what Unilever is replicating in the developed world has originated in India. For instance, HUL had launched a sachet blitz across such power brands as Close-Up, Pepsodent, Sunsilk, Ponds, Vaseline, Brooke Bond Taj Mahal and Bru to increase product penetration at the bottom of the pyramid. However, a relatively smaller player, Cavin-Kare from the South, had a huge role to play in ushering the sachet revolution as a strategy for low-unit pricing to drive sales at the low end.

Unilever is now busy taking such lessons from D&E markets – which contribute roughly 53% to the global turnover – to a developed world that’s teeming with bargain hunters and value seekers. Innovations that add value, particularly at the lower end of the price spectrum, are being shipped to developed markets. What we have been able to do better as a business is take some of the techniques we use in one part of the world and apply them where they are appropriate elsewhere,” adds the Unilever spokesperson.

Kannan Sitaram, operating partner at India Equity Partners, a New York-based private equity firm, says with Unilever adopting value-for-money strategies in the developed world, the bottom of the pyramid term has now got a new dimension. “Bottom of the pyramid does not mean poor consumers; it includes those who want a particular value at a price, across categories.”

KALA VIJAYRAGHAVAN MUMBAI ET120928