China Food

Unilever’s new structure is coming

When entering the second half of 2022, Unilever, the global FMCG giant, will also “restart”.

According to the arrangement, from tomorrow (July 1), Unilever will officially launch a new organizational structure, shifting from the previous three major businesses to five business groups. This means that the brands such as heluxue, Menglong, Jiale and Zhizhuo butcher, which were originally under the same food and beverage banner, will “go their separate ways” and be classified under the ice cream and nutrition sectors respectively.

Xiaoshidai noticed that before the new framework came into effect, this century old FMCG enterprise recently attended the Deutsche Bank 2022 global consumer conference and focused on the scale, objectives and planning of the nutrition business where Carrefour is located. From the perspective of revenue in 2021, this business is also the “most attractive” sector of Unilever.

Now, let’s have a look.

90 billion

At the meeting, Unilever disclosed the business scale under the new structure for the first time.

According to Graeme pitkethly, chief financial officer of the company, Unilever reorganized its business into five business groups, including nutrition, beauty and health, personal care, home care, with an annual turnover of more than 10billion euros, and ice cream with a turnover of slightly less than 7billion euros.

Among them, the nutrition business group is the “most profitable” sector of Unilever, with a revenue of 13billion euros last year (now about 90.994 billion yuan). This data also includes the Lipton tea business that will be officially divested. The transaction is expected to be completed in the second half of this year, and the revenue of relevant businesses in 2020 is about 2billion euros.

With the new structure coming into effect, the businesses of Carre, Zhuo meat maker, Hellmann’s, and Lipton tea (such as the joint venture with Pepsi instant tea) that have not been stripped off will be under the nutrition business group and managed by Hanneke Faber. She is currently the president of Unilever food and beverage and has been appointed president of nutrition.

“The new operation mode is a significant change compared with today’s matrix structure. It makes each business group fully responsible for strategy, growth and profit results, while benefiting from a more streamlined Enterprise Center (Note: responsible for the overall strategy of the group) and Unilever business operations (Note: responsible for supporting the business group, including technology, systems and processes).” Pitkethly said.

Pitkethly also said that the company has 13 brands with annual sales of more than 1billion euros. “Among them, the largest dove has a scale of more than 5billion euros, and Carrefour has more than 4billion euros. Moreover, these 13 billion euro brands (last year) have contributed more than half of our turnover in total.”.

Xiaoshidai noticed that among these heavyweight brands, there have been many “figures” of food and beverage, including Carrefour, Hellmann’s and Lipton under the nutrition department, as well as Menglong, heluxue and Ben & jerry’s in the ice cream department.

After the “muscle” show, there will be a special session to introduce Unilever’s largest business.

“In terms of nutrition, 60% of our sales come from two big Mac brands: Carrefour and Hellmann’s. 80% of our sales come from ten global brands, so this is a (highly) centralized lineup.” Faber, who has been appointed president of nutrition of the company, said at the meeting.

Specifically, Faber said that its largest brand, Jiale, sold 4.4 billion euros last year (now about 30.802 billion yuan). “(Carrefour) operates in almost every market of Unilever. It has a large scale, stable growth and strong profitability”.

It is reported that Carre has four businesses. The largest “soup pieces and seasonings” include thick soup treasure, concentrated chicken juice and other products. The remaining parts include dinner solutions (Note: Ruyi powder meat sauce), soup and other dietary raw materials. From a subregional perspective, more than half of Carrefour’s businesses are located in emerging markets. According to the scene, home consumption accounts for the majority, while the catering planning of catering businesses accounts for about one third.

Followed by Hellmann’s, the second largest brand.

“This is a brand with an annual turnover of nearly 2billion euros (now about 13.995 billion yuan), covering about 70 countries. It is also large-scale, high profit, and continues to grow rapidly. The average annual compound growth rate in the past two years has reached double digits, and it has a strong position in the mayonnaise industry.” Faber said that at present, most of Hellmann’s businesses are located in developed markets.

“Because it goes with sandwiches and hamburgers, which is something that western countries (more often) eat.” Faber said that with the development of these delicacies to markets such as Eastern countries, Hellmann’s has a great opportunity to further develop and has successfully opened up some blank markets. Xiaoshidai learned from Unilever that Hellmann’s has not officially entered the Chinese market through official channels. However, we can see that the merchants are selling a series of products on e-commerce.

Subsequently, Faber also named two “potential stocks” in his heart at the meeting. First, Horlicks and boost, which were acquired in 2020, have total sales of about 600million euros, and are currently concentrated in India. Second, the plant meat brand “Zhizhuo meat craftsman” acquired in 2019 has achieved a compound annual growth of 70% in the past two years.

“We have been expanding the range of meat growers and orderly entering the blank areas of regional markets and products.”
Faber said that for meat growers, it is very important to establish a brand through food planning business.

“Therefore, in India, China and Latin America, we provide Burger King’s imperial Castle (with plant meat patties). We also have good cooperation with Starbucks and pizza shops. What is very interesting is that just two weeks ago, Burger King in Belgium said that in fact, one third of the Royal Castle they are selling now is made of plant meat patties.” Faber said.

“Top three in the industry”

The nutrition business group, which will follow Unilever to open a new chapter, has also given the latest “small goals”.

“Our ambition is to become a world-class force for the good of food. World class refers to business, and the goal is to become the top three in growth and financial performance in our industry. Being good means doing things well through good methods (beneficial to mankind and the earth). Faber said that in order to achieve the goal, Unilever nutrition business group has also delineated three strategic priorities.

First, a healthier product portfolio. “80% of the sales of nutrition business come from growing categories, and the growth rate of these categories has reached or exceeded the overall market level.” Faber said that in 2018, the above proportion was less than 50%.

In fact, in order to build a product portfolio that can drive high growth, Unilever has performed many “operations” on its businesses in recent years.

“(the increase in share) was driven by our divestiture of large assets, including selling spreads, selling tea and selling a large number of smaller food brands, such as Bertolli and Baltimore, which were sold last year. We continued to abandon small food brands in low growth areas, and then acquired Horlicks and Zhuo butcher.” Faber said.

Snack generation introduced that during 2017-2021, Unilever vigorously reshaped its product portfolio, bought many foods that responded to the health trend, and sold some food and beverage products with weak growth. During the period, the company’s total sales revenue of 11billion euros (about 79.583 billion yuan) came almost entirely from tea and spread sauce.

“Since 2017, we have stripped the spread sauce and tea, which account for nearly a quarter of our food and beverage business, making the business grow steadily.” Pitkethly said at the meeting.

“After years of growth of only 1% to 2%, we have accelerated growth since the second half of 2020, and last year the growth was more than 6%.” “Our product portfolio is much better now than it was four years ago,” Faber said (Note: growth data do not include stripped Lipton tea)

She pointed out that Unilever would continue to improve the health of its product portfolio and focus on suitable mergers and acquisitions. “If we can, we will (continue) give up small brands, but there are not many low growth brands. If there is a good opportunity, we will continue to seek to acquire functional nutrition products and cooking aids, which are really areas with strong growth.”.

Second, dare to create a healthier core, including products and implementation. In terms of product innovation, Faber said that Unilever has developed a new and effective framework.

“Before 2019, we basically measure the superiority of our products by blind taste test, comparing our products with key competitive products, and then saying that if you win or lose, how should you flavor and add sugar and salt?” She revealed that in 2019, Unilever launched a new framework. On the basis of having to win the blind taste test, the new products also added evaluation factors such as sustainable packaging and procurement, clean labels, etc.

“Only when you meet these conditions, we will think that a product is excellent.” Faber said that the previously launched Jiale low salt or salt free thick soup products and Lipton Zero sugar instant iced tea are all successful cases and have achieved good growth.

“Now, everything is fine. But when it can not appear in front of consumers, it is completely worthless, so we should also attach great importance to implementation.” Faber said.

Taking Jiale China as an example, she said that when static management was implemented in Shanghai some time ago, its factories implemented closed-loop production after approval, and tried to dredge up logistics. In order to attract consumers to buy, the brand also linked KOL to carry out online communication.

Third, make good use of the empowerment of the new architecture. “This is a simpler, faster and more agile new organization.” Faber said, for example, an independent business group can directly own and manage the supply chain. “This does not exist in the current matrix architecture, (new model) will help us take action faster and make the work easier.”.

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