Unilever PLC · LSE:ULVR
Unilever — Morgan Stanley Investor Field Trip Beijing (March 2008)
37 slides from Unilever's conference presentation, Mar 12, 2008
Slide 1: Accelerating change: Unilever China, Outpacing the market
Accelerating change Unilever China Outpacing the market Morgan Stanley Frank Braeken Investor Field Trip Group Vice President Beijing China, Hong Kong and Taiwan 12 March 2008
Slide 2: Agenda
• Unilever China: the context • The opportunity • The challenges and our responses • The outcome
Slide 3: Unilever China: the context
• Unilever China: the context • The opportunity • The challenges and our responses • The outcome
Slide 4: Local roots with global scale
Local roots with global scale Local roots Global scale
Slide 5: Unilever's strategic priorities
Unilever’s strategic priorities Personal Developing & Vitality Care Emerging Markets (D&E)
Slide 6: D&E: a major driver of Unilever's growth
D&E: a major driver of Unilever’s growth D&E underlying sales growth c. 8% p.a. since early 1990s % 2004 Sales % 2007 Sales Other developed Other developed 3% 3% North North America D&E America 23% 36% 21% D&E 44% Western Western Europe Europe 32% 38%
Slide 7: D&E growth is profitable
D&E growth is profitable 2007 Operating margin before RDIs* Unilever average Developed D&E D&E excl. Russia & China *Restructuring, Disposals, One-off Items
Slide 8: Unilever's local roots
Unilever’s local roots Our heritage and local expertise mean that D&E is in our DNA • Understanding of the local consumer • Brands and products across a wide range of income levels • Critical mass on the ground • Corporate reputation with local stakeholders and talent pool Local roots
Slide 9: Unilever and China - A long history
Unilever and China - A long history Lever Brothers entered China in 1923 Unilever returned to China in 1986
Slide 10: Investing to win in China
Investing to win in China • Priority status: 5 year growth plan • ‘One Unilever’ organisation • New leadership team • Increased innovation capability in Shanghai (+100 FTEs) • Step-up in marketing investment • Priority allocation of talent
Slide 11: Doubling the China business in 3 years
Doubling the China business in 3 years Unilever sales in China US$ 1 bn US$ 0.5 bn 2004 2005 2006 2007
Slide 12: Unilever China by Category
Unilever China by Category Oral Savoury 12% 12% Dressings 3% Spreads 1% Hair Tea 19% 5% Ice Cream 10% Skin Laundry 16% 22% Based on 2007 turnover
Slide 13: The opportunity
• Unilever China: the context • The opportunity • The challenges and our responses • The outcome
Slide 14: The size of the prize
The size of the prize 10 9 +0.1bn Market size US$ bn 8 +0.3bn 7 +0.3bn Ice cream 6 Tea 5 +0.1bn Savoury 4 Fabric cleaning +0.6bn Oral 3 Personal wash 2 Face 1 +0.4bn Hair 0 2007* 2010# * Source: AC Nielsen # Source: Unilever estimates
Slide 15: HPC market still consolidating
HPC market still consolidating Skin cleansing Hair Oral Fabric cleaning Face care Unilever Global competitors Local competitors Others Source: AC Nielsen
Slide 16: The race is still open - Brand loyalty
The race is still open - Brand loyalty Q. If you were buying from your usual store and the brand is not available, would you…?” 10 10 11 11 8 10 6 11 15 14 13 16 12 12 21 47 70 71 71 57 69 72 71 38 5 5 6 11 7 6 9 6 m s es o ks nt ks ts te po ea ui ge in ac dl et sc am oo dr cr er Sn ar Bi et tn e ft
Slide 17: The challenges and our responses
• Unilever China: the context • The opportunity • The challenges and our responses - Understanding the Chinese consumer - Connecting with the Chinese consumer - Sustainable expansion of distribution - Building a world class supply chain - Managing complexity - War for talent • The outcome
Slide 18: Case study - Clear anti-dandruff
Case study - Clear anti-dandruff Unmet consumer need • 70 % of Chinese have dandruff concerns • Professional AD shampoos account for only 18% of the market • 40 % of users are not satisfied with the current offering • AD needs are same cross gender. • There is no AD brand speaking to me in my langua
Slide 19: Clear brand activation
Clear brand activation Airport Billboard Bus body Launch conference Symposium Metro Office LCD Bus shelter Magazine Advertising Promotion Road-show Flagship Sampling store wrap ISA up
Slide 20: Clear - Market progress
Clear - Market progress % Value market share 7 Share in handler 6 5 4 Total share 3 2 1 0 Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Weighted distribution: 43% 51% 53% 55% Source: Retail Audit Data
Slide 21: Case study – Knorr convenient thick soup
Case study – Knorr convenient thick soup Consumer insights: • 99.9% of all soup consumption in China is in-home • Knorr Thick Soup Treasure produces the taste and nutrition of thick soup in instant soup time.
Slide 22: Challenge – Connect with the Chinese consumer
Challenge – Connect with the Chinese consumer • Highly complex media environment segmented nationally, provincially and locally (660 discrete markets) • Top 10 TV stations account for 30% of national audience NATIONAL • 4 MUNICIPALITIES APPROACH Fact File • 23 PROVINCES • 2 ADMIN REGIONS TV Penetrat
Slide 23: Response – Micromarketing
Response – Micromarketing The ‘Heat cube’ – Prioritisation across geography, category and channel hy ap gr eo G Channels 1 2 3 4 Category
Slide 24: Micromarketing – Laundry
Micromarketing – Laundry OMO Competitor HLJ HLJ JL JL NM NM BJ LN LN BJ XJ GS XJ GS NX TJ TJ HeB NX S SD SX SD X QH QH SaX HeN JS SaX HeN JS SH CD AH CD AH SH XZ HuB XZ HuB SC CQ ZJ SC CQ ZJ HuN JX HuN JX FJ GuZ GuZ FJ TW TW YN GX GD YN GX GD High SOV: >30% HN HN Medium SOV: 20-30% Low SOV < 20% Sou
Slide 25: Micromarketing – Oral
Micromarketing – Oral Zhonghua Zhonghua Crest Competitor HLJ HLJ JL NM BJ LN JL NM XJ GS LN NX TJ BJ HeB GS XJ SX SD NX TJ HeB QH SX SD SaX HeN JS CD AH SH QH SaX JS XZ HuB HeN SC CQ ZJ CD AH SH XZ HuB HuN JX SC CQ ZJ FJ GuZ JX TW HuN FJ YN GX GD GuZ TW YN GX GD HN High SOV: >30% HN Medium SOV: 20-3
Slide 26: Micromarketing – Lux body wash in South China
Micromarketing – Lux body wash in South China Opportunity • Guang Dong Province is the largest shower gel market Objectives • Grow turnover +50% • Increase market share >6% Expansion plan • Increase share of voice • Expand media footprint • Continuous promotion schemes to drive consumer uptake • Inc
Slide 27: Outcome
Outcome In 200 stores 110% increase in uptake 60% sales growth 8% market share * *Source: AC Nielsen
Slide 28: Challenge – Sustainable expansion of distribution
Challenge – Sustainable expansion of distribution • Sustainability • Balance trade push and consumer pull • Scale sufficient to make distribution viable • Strength of relationship with route to market partners • Capability build
Slide 29: Response – Implementing best practice distribution model
Response – Implementing best practice distribution model Sc 2 n 2010 al d e up Sc 1 s al t e up WORLD 2007 ENHANCED CLASS STABILIZED OPERATIONS CONTROLLED OPTIMIZED DISTRIBUTION COVERAGE UNILEVER UNILEVERFIELD CAPABILITY FIELD CAPABILITY
Slide 30: Challenge – Building a world class supply chain
Challenge – Building a world class supply chain Manufacturing Heilongjiang locations Inner Mongolia Jilin Liaoning Xinjiang 1997 16 Beijing Hebei Tianjin Shanxi Ningxia Shandong Qinghai Gansu Shaanxi Jiangsu 2007 7 Xizang Henan Anhui Shanghai Hubei Sichuan Chongqing Zhejiang Jiangxi Hunan Fujian Gui
Slide 31: Conversion cost reduction
Conversion cost reduction Laundry Powder Personal Wash Liquids Conversion Cost per Ton Conversion Cost per Ton 15 Y00 Y02 Y04 Y06 Y08 Y00 Y02 Y04 Y06 Y08 Est Est.
Slide 32: Challenge – Managing complexity
Challenge – Managing complexity From (1997) To (2007) 10 joint ventures 1 wholly owned business 13 business units 1 operating unit for Foods, Ice Cream and HPC 29 senior executives Simplified management structure led by 12 senior executives
Slide 33: Challenge – War for talent
Challenge – War for talent 17% Employee turnover rate FMCG 14.9% 15% 13% All industries 13.9% 11% 9% Unilever 10.2% 7% 5% 2003 2004 2005 2006 • Source: Hewitt Salary survey 2006
Slide 34: Response – A rewarding Vitality environment
Response – A rewarding Vitality environment • Correct leadership objectives • Developing Asian leaders • Simplification • De-layering • Stimulating environment
Slide 35: The outcome
• Unilever China: the context • The opportunity • The challenges and our responses • The outcome
Slide 36: The outcome
The outcome A Unilever growth engine with sustainable 20% growth momentum
Slide 37: Accelerating change Unilever China
Accelerating Unilever Chinachange Outpacing the market Mumbai 14th November 2007
Unilever — Morgan Stanley Investor Field Trip Beijing (March 2008) on 6ix