Unilever's Acquisitions PDF

ThompsonStrickland:
Strategic Management:
Concepts and Cases, 13th
Edition
case
22. Unilevers Acquisitions

of Slimfast, Ben & Jerrys,
& Bestfoods
22
Case
The McGrawHill
Companies, 2002
Unilevers
Acquisitions
of SlimFast,
Ben & Jerrys,
and Bestfoods
Arthur A. Thompson
The University of Alabama
Following several years of sluggish performance, Unilevers top management announced a new five-year Path to Growth strategy in February 2000 to rejuvenate the
company and restructure its wide-ranging portfolio of food, home, and personal care
businesses. The new strategy initiative fashioned by Unilever co-chairmen Niall FitzGerald and Antony Burgmans came on the heels of a decline in Unilever PLCs stock price
from a peak of 690 pence in June 1998 to 341 pence just prior to the announcement.
Unilevers Path to Growth initiative involved greatly reducing the size of the companys brand portfolio, concentrating R&D and advertising on the companys leading
brands, divesting a number of underperforming brands and businesses, boosting product innovation, making new acquisitions, and achieving faster growth in sales and
earnings. Focusing on key brands was expected to allow Unilever to concentrate its advertising and marketing efforts on higher-margin businesses and build brand value,
thus gaining increased pricing power with supermarket retailers. The five-year initiative was expected to cost a total some 5 billion euros (); entail closing or selling 100
factories and laying off some 25,000 employees (10 percent of Unilevers workforce)
so as to consolidate production at fewer plants; and ultimately produce annual savings
of 1.5 billion through better strategic fits, a streamlined supply chain, and greater operating efficiencies. By 2004, Unilever management predicted, the company would be
expanding its sales 5 to 6 percent annually and have boosted its operating profit margins from 11 to over 16 percent, sufficient to produce double-digit growth in earnings
per share.
Following the announcement of its Path to Growth strategy, which was met with
considerable skepticism on the part of industry analysts, Unilever management undertook a series of actions over the next 12 months to deliver on its commitments to boost
the companys sales and profits. By March 2001, the company had
Made 20 new acquisitions worldwide, including SlimFast diet foods; Ben &
Jerrys ice cream; Bestfoods (whose 1999 sales totaled $8.6 billion across 110
Copyright 2001 by Arthur A. Thompson.

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Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods
countries and whose major brands included Hellmanns mayonnaise, Skippy

peanut butter, Mazola corn oil and margarines, and Knorr packaged soup mixes);
Corporacion Jaboneria Nacional (an Ecuadorian company, with sales of approximately 114 million, that had strong market positions in detergents, toilet soaps,
skin creams, dental care, margarine and edible oils); Grupo Cressida (a leading
consumer products company in Central America); and Amora-Maille (a French
maker of mustards, mayonnaises, ketchups, pickles, vinegars, spices, and cooking
sauces with 1999 sales of about $365 million).
Cut the companys brand portfolio from 1,600 brands to 970. (To reach the 2004
corporate goal of focusing on about 400 core brands, Unilevers brand reduction
strategy called for letting certain brands wither and decline without active promotion and support, selling those brands that no longer fit in with Unilevers future
strategy, and discontinuing the rest.)
Launched 20 internal initiatives to deliver additional sales of 1.5 billion on an
annualized basis.
Divested 27 businesses, including the companys Elizabeth Arden cosmetics business, the Elizabeth Taylor and White Shoulders fragrances, the companys European bakery business, the Bestfoods Baking Company (a U.S. bakery business
inherited from the acquisition of Bestfoods), most of its European dry soups and
sauces businesses, and an assortment of small businesses that produced and marketed lesser-known European grocery brands.
Reorganized the company into two roughly equal-sized global divisions, one including all of the companys food products and the other including all of its household and personal care products.
Started two new businessesCha, a chain of tea houses, and Myhome, a laundry
and home cleaning service test-marketed in Britain in 2000 and being tested in the
United States and India in 2001.
Unilevers operating results after the first year of the Path to Growth initiative
were somewhat encouraging. In February 2001, the company announced that sales
growth in the companys major brands had accelerated to 4.9 percent in the fourth
quarter of 2000. Revenues in 2000, including acquisitions, were up 16 percent, to
47.6 billion. Net profits, however, were down from 2.97 billion in 1999 to 1.1 billion in 2000, largely due to 1.3 billion in restructuring charges associated with the
Path to Growth initiative. Management said it was ahead of schedule in its restructuring efforts.
COMPANY BACKGROUND
Unilever was created in 1930 through the merger of Margarine Unie, a Dutch margarine company, and British-based Lever Brothers, a soap and detergent company.
Margarine Unie had grown through mergers with other margarine companies in the
1920s. Lever Brothers was founded in 1885 by William Hesketh Lever, who originally
built the business by establishing soap factories around the world. In 1917, Lever
Brothers began to diversify into foods, acquiring fish, ice cream, and canned foods
businesses. At the time of their merger, the two companies were purchasing raw materials from many of the same suppliers, both were involved in large-scale marketing of
household products, and both used similar distribution channels. Between them, they
had operations in over 40 countries.
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Cases in Strategic Management
Searching for Focus and Identity

Over the next decades, Unilever continued acquiring companies and brands, gradually
moving into more food and household products categories in more and more countries.
Still, as late as the mid-1970s, more than half of Unilevers profits came from its West
African plantations that produced bulk vegetable oils for margarine and washing powders. In the 1970s and early 1980s, Unilever diversified beyond food and household
products into specialty chemicals, advertising, packaging, market research, and a U.K.based franchise for Caterpillar heavy equipment. The specialty chemicals business
transformed products from some of the companys plantations into ingredients for food
and household products; Unilever also had shipping lines that transported Unilever
products. However, during the late 1980s and 1990s, the specialty chemicals, advertising, packaging, shipping, and market research businesses were divested in an attempt
to shed the companys image as a conglomerate and focus resources on the companys
core businesses.
Unilevers broad-based product and geographic diversification in foods, personal
care products, and household products spawned a complex management structure that
gave considerable decision-making power to country managers to set their own priorities and to tailor products to local tastes. From time to time, Unilevers top executives
had launched new initiatives and reorganization plans aimed at giving the company
more focus as a multinational marketer of food, personal care, and household products.
Still, in 2000, the company had 1,600 brands of food, personal care, and household
products, with sales exceeding $43 billion and operations in 88 countries. Unilever was
one of the worlds 5 largest food and household products companies and had been
ranked among the top 60 of Fortunes Global 500 largest corporations since 1995. According to Irish co-chairman Niall FitzGerald, Were not a manufacturing company
any more. Were a brand marketing group that happens to make some of its products.1
In early 2000, at the time the Path to Growth initiative was announced, the top 400
of Unilevers 1,600 brandssome global brands like Liptons and Dove and some local jewels like Persil (the leading brand of detergent in Great Britain)accounted for
over 85 percent of the companys annual revenues. A number of Unilever brands had
either the highest or second highest share in their respective markets. Exhibit 1 shows
Unilevers product and brand portfolio in February 2000.
Organization and Management

To preserve the companys Dutch and British heritage, Unilever maintained two headquartersone in Rotterdam and one in Londonand operated under two co-chairmen.
The companys headquarters group in Rotterdam, headed by Antony Burgmans, was in
charge of food products, while the London headquarters group, under Niall FitzGerald,
was in charge of personal care and household products. FitzGerald had been chairman
of the London-based portion of Unilever since 1996 and was said to have been instrumental in reorganizing Unilevers 1,600-brand portfolio around 14 groups as opposed
to the former 57 groups. Company observers regarded FitzGerald as one of the most
able and innovative Unilever chairmen in decades. Officially, the two co-chairmen had
equal status and responsibilities. Each had offices in both Rotterdam and London, shuttling between the two headquarters locations every couple of weeks. They kept in
contact via phone daily. To complement its unique dual headquarters/dual co-chair approach, the company had a dual holding company structure whereby Unilevers own1
Quoted in The Financial Times, February 23, 2000, p. 27.
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exhibit 1 Unilevers Business and Product Line Portfolio in Early 2000

Unilever Foods Group
Product Category
Brands
Comments
Margarines, spreads,
and cooking oils
I Cant Believe Its Not Butter, Country Crock,

Imperial, Take Control, and Promise spreads,
Brummel & Brown spreads and sprays,
Bertolli and Puget olive oils, Flora/Becel
spreads and cooking products
The world leader in margarine and related

spreads and olive oil, with sales in more
than 50 countries, Unilever had significant
oil plantations in the Democratic Republic
of Congo, Cte dIvoire, Ghana, and Malaysia.
Frozen foods
Birds Eye frozen foods (sold in U.K.), Iglo

frozen foods (sold in most other European
countries), Gortons frozen seafood products,
Findus pan-prepared meals, and Quattro
Stelle meal solutions
Ice cream and

frozen novelties
Breyers, Magnum, Solero, Walts, Langnese,

Ola, Algida, Cornetto, Viennetta, Pinguino,
Carte dOr, Klondike, Popsicle, and Good
Humor ice cream products
Unilever had ice cream sales in more than

90 countries worldwide.
Tea-based beverages
Lipton, Lipton Ice Tea and Lipton Brisk

(ready-to-drink teas), Brooke Bond and
Beseda teas
Lipton was the worlds most popular tea

brandUnilever had extensive tea plantations
in India, Tanzania, and Kenya that supplied
tea for its own brands and the tea market in
general
Culinary products
Rag and Five Brothers pasta and pizza

sauces, Colmans mustard and sauces, Amora
and Maille mustards, ketchup, and dressings,
Lawrys seasonings, Upron Spices and
seasonings, Wishbone and Calv salad
dressings; Calv peanut butter; Slotts and
Klocken mustards, ketchup and seasonings,
Sizzle & Stir sauces, Wishbone salad
dressings, Oxo stock cubes, Batchelors
dry soup mixes (a U.K. brand), Royco dry soup
mixes (sold in France and Belgium), Heisse
Tasse dry soup mixes (sold in Germany), and
instant Cup-A-Soup, Recipe, McDonnells,
Bla Band, and Lipton soups
Rag was Unilevers biggest selling culinary

brand; Calv was Unilevers most widely used
culinary brand with sales in Greece, Russia,
Romania, and much of Europe. Amora
mustard was the best-selling mustard brand
in France. A number of the dry soups and
sauces businesses were sold to Campbell
Soup in January 2001 for approximately
1 billion.
Desserts
Carte dOr
Bakery products
Bread and confectionery mixes, baking

ingredients, frozen bakery products such as
Danish pastries, muffins, and croissants
Had operations across 13 European countries,

with sales of 860 million, operating profits of
60 million, and a workforce of approximately
3,900 people
(continued)
ership was divided into two classessome shareholders owned Unilever NV stock
(based largely on food products) that traded on the Dutch stock exchange, and some
shareholders owned Unilever PLC stock (based largely on personal care and household
products) that traded on the London FTSE and was included as part of the FTSE 100
Index. Since Unilever stock was also traded on the New York Stock Exchange, the
company reported its financial results in euros, British pounds, and U.S. dollars. The
two companies, Unilever NV and Unilever PLC, operated as nearly as practicable as a
single entity; a series of intercompany agreements ensured that the position of shareholders in both companies was virtually the same as having shares in a single company.
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exhibit 1

& Bestfoods
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Case
(concluded)
Unilever Home & Personal Care Group (operations in 60-plus countries)
Product Category
Brands
Comments
Prestige fragrances
Calvin Klein, Chlo, Cerruti, Valentino,

Lagerfeld, Nautica, Elizabeth Taylor, White
Shoulders, Vera Wang
Unilevers fragrance brands represented

one of the largest fragrance businesses
in the world.
Deodorants and
toiletry products
Rexona/Sure, Axe/Lynx, Dove, Degree, Brut,

Suave, Impulse
Rexona/Sure was the worlds number one

deodorant brand.
Hair care
ThermaSilk, Sunsilk, Mods Hair (Japan),

Finesse, Suave, Caress, Dove, Salon
Selectives, Timotei, and Organics shampoos;
AquaNet and Rave hair care products
Oral care and

oral products
Aim, Pepsodent, Mentadent, and Close-up

(Asia-Pacific, United States), Signal (Europe),
Zhongua (China) toothpastes; Signal and
Mentadent chewing gums
Soaps, lotions, and

skin care products
Dove, Lux, Degree, Caress, Lever 2000,

Lifebuoy, and Shield soap bars; Ponds,
Vaseline, and Fair & Lovely skin care products;
Hazeline shampoos and skin care products
(sold in China); Q-tips cotton swabs and balls
Dove was the worlds number one brand

of soap.
Laundry detergents
and fabric conditioners
Wisk, Oxo, Omo, Surf, Ala, Persil, All, and Skip

detergents; Snuggle, Cajoline, and Comfort
fabric conditioners.
Snuggle was the number two brand of fabric

softener in the United States with annual sales
of about $350 million.
Household care
and cleaning products
Domestos surface cleaners, Cif household

cleaners, Sunlight dish detergents, and
Solvol (a heavy-duty hand cleaner marketed
in Australia and New Zealand)
Domestos was marketed in 43 countries, and

Cif was marketed in 53 countries.
Diagnostics
Unipath pregnancy tests
Professional cleaning
Diversey/Lever commercial cleaning products
These products were sold to institutional,

laundry, and food and beverage customers.
Source: Compiled by the case researcher from a variety of company sources.
Longtime company analysts regarded Unilever management as a slow-moving,

unwieldy, and inherently conservative Anglo-Dutch bureaucracyone that operated in
a staid manner resembling the civil service approach of government agencies. As one
analyst put it, Historically, Unilever has been a very inbred business. People used to
join the company from college and leave it when they were carried out in a box. It was
a cradle-to-grave company.2 In 2001, about 90 percent of the companys managers
were locally recruited and trained.
Company critics, moreover, saw Unilever as burdened by lack of a coherent corporate strategy and an array of lesser-known, low-volume brands; very few of
Unilevers brands had global standing or qualified as power brands. In emergingcountry markets, where there was the greatest potential to grow sales of food and
household products, Unilevers performance was said to be lackluster.
Unilevers food businesses had traditionally been organized around countries, with
each country having its own factories engaged in making products for mostly national
and sometimes regional geographic markets. Some countries had multiple brands of
2
Quote attributed to David Lang, consumer industry analyst at brokerage firm Investec Henderson
Crosthwaite, in an article by John Thornhill in the Financial Times, London edition, August 5, 2000, p. 12.
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exhibit 2 Summary of Unilevers Performance, 19952000 (dollars

and euros in millions, unadjusted for cross-year exchange
rate fluctuations)
Net Income
Fixed Assets
(Including Goodwill
and Intangibles)
Employees
$1,017
2,953
3,270
5,463
2,500
2,325
$34,852
27,940
35,807
31,671
30,993
30,077
295,000
255,000
267,000
287,000
306,000
308,000
Revenues
Year
Dollars
Euros
2000
1999
1998
1997
1996
1995
$43,809
43,680
44,908
48,761
52,067
49,738
47,582
40,977
40,437
41,105
39,785
36,234
Source: Unilever annual report for 2000 data; Fortune Global 500 statistics for 199599 data; and Wright Investors Service for revenues in euros.
the same productfor example, American shoppers could choose from seven Unilever
brands of margarine (Promise, Imperial, Country Crock, Brummel & Brown, Mazola,
Take Control, and I Cant Believe Its Not Butter!); in the United Kingdom there were
nine Unilever margarine brands, although only three were supported by advertising.
The strategy in margarine was to cater to a wide range of tastesfrom a German preference for lighter-colored spreads to British preferences for spreads with a higher fat
content to American tastes for flavorful and healthier spreads. There were cases where
the same Unilever productsMagnum ice cream bars, for instancedid not utilize
uniform names, logos, or packaging from country to country.
Performance Issues
Unilever shareholders had not been particularly happy with the companys performance in recent years (see Exhibit 2). During the 1990s, Unilevers sales grew at an
average annual rate of 2 percent, well under managements target rate of 56 percent
and below the 3.1 percent achieved by Nestl (the worlds largest food products company) and the 4.9 percent achieved by Procter & Gamble. The share price of Unilevers
London-based operation, Unilever PLC, had lagged the FTSE 100 Index by almost 40
percent since 1995. Unilever had sales per employee of around $160,000 in 2000,
compared with $360,000 for Procter & Gamble, $205,000 for Nestl, $458,000 for
Kelloggs, and $605,000 for General Mills.
Unilever executives believed the Path to Growth initiative would rectify the companys mediocre performance. Concentrating the lions share of R&D, advertising and
promotion, and management time on the top 400 brands, they believed, would deliver
56 percent annual growth in revenues. Faster revenue growth, coupled with costsaving efficiencies from better strategic and resource fits among the top 400 brands,
was expected to push operating profit margins up from 11 to 16 percent and permit
double-digit earnings growth by 2004. Much of the margin improvement was expected
to come from pruning the low-volume, local brands and thereby simplifying and
streamlining the companys supply chain.
To stimulate more innovation and entrepreneurial thinking, Unilever had begun
stepping up efforts to attract talented managers from outside the company. In addition,
Unilever had revised its incentive compensation system. In the old system, the top
300400 managers could earn an annual bonus worth up to 40 percent of their salaries,
with the average bonus rate being 15 to 25 percent. Under the recently introduced
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system, outstanding managers who hit exacting growth and earnings targets could earn
up to 100 percent bonuses. A further move was to alter the award of stock options from
giving equal amounts to all managers at a particular level (based on the companys
overall performance) to making awards of shares based on individual performance.
INDUSTRY ENVIRONMENT
The food and household products industry was composed of many subsectors, each
with differing growth expectations, profit margins, competitive intensity, and business
risks. Industry participants were constantly challenged to respond to changing consumer preferences and to fend off maneuvers from rival firms to gain market share.
Competitive success started with creating a portfolio of attractive products and brands;
from there success depended largely on product-line growth through acquisitions (it
was generally considered cheaper to buy a successful brand than to build and grow a
new one from scratch) and on the ability to continually grow sales of existing brands
and improve profit margins. Advertising was considered a key to increasing unit volume and helping drive consumers toward higher margin products; sustained volume
growth also usually entailed gaining increased international exposure for a companys
brands. Improving a companys profit margins included not only shifting sales to products with higher margins but also boosting efficiency and driving down unit costs.
In 2000, there was a wave of megamergers involving high-profile food and household products companies (see Exhibit 3). Three factors were driving consolidation
pressures in the food industryslower growth rates in the food sector, rapid consolidation in retail grocery chains (which enhanced the buying power of supermarket
chains and enhanced their ability to demand and receive slotting fees for allocating
manufacturers favorable shelf space on their grocery aisles), and fierce competition between branded food manufacturers and private-label manufacturers.
The earnings growth picture for many food companies had been bleak for several
years, and the trend was expected to continue. In the United States, for example, sales
of food and household products were, on average, growing 12 percent, slightly higher
than the 1 percent population growth. More women working outside the home, decreasing household sizes, and greater numbers of single-person and one-parent households were causing a shift of food and beverage dollars from at-home outlays to
away-from-home outlays. The growth rate for food and household products across the
industrialized countries of Europe was in the 2 percent range, with many of the same
growth-slowing factors at work as in the United States. Food industry growth rates in
emerging or less-developed countries were more attractivein the 34 percent range,
prompting most growth-minded food companies to focus their efforts on markets in
Latin America, Asia, Eastern Europe, and Africa.
Since 1985, the share of private-label food and beverages sold in the United States
had risen steadily, accounting for roughly 25 percent of total grocery sales in 2000, up
from 19 percent in 1992. Growing shopper confidence in the leading supermarket
chains and other food retailers like Wal-Mart (which had begun selling a full line of
grocery and household items at its Supercenters) had opened the way for retail chains
to effectively market their own house-brand versions of name-brand products, provided the house brand was priced attractively below the competing name brands. Indeed, with the aid of checkout scanners and computerized inventory systems, retailers
knew as well or better (and more quickly) than manufacturers what customers were
buying and what price differential it took to induce shoppers to switch from name
brands to private-label brands. These developments tilted the balance of power firmly
Value of Deal
$10.5 billion in cash
$19 billion in cash,

stock, and debt
$4.4 billion
$2.9 billion
$12.4 billion in cash

and stock
$1.45 billion
Companies Involved
General Mills acquired the

Pillsbury unit of Diageo (a U.K.based company with a wideranging portfolio of alcoholic
beverage brands and the parent
of Burger King and Pillsbury)
Philip Morris (the parent of Kraft

Foods) acquired Nabisco
Kelloggs acquired Keebler
ConAgra acquired International

Home Foods
PepsiCo acquired Quaker Oats
Cadbury Schweppes acquired

the Snapple Beverage Group
from Triarc, Inc.
Cadbury Schweppes brands: Schweppes and

Canada Dry tonics, sodas, and ginger ales;
7UP; Dr Pepper; A&W; Motts apple juices;
Clamato juices; Cadbury chocolates and
confectionery items; Trebor, Pascall, Cadbury
clair, and Bassett candies
Snapple brands: Snapple ready-to-drink teas

and beverages
Quaker brands: Gatorade, Quaker Oats cereals,

Rice-A-Roni, Aunt Jemima, Near East, Golden
GrainMission pastas
International Home Foods brands: Chef

Boyardee, Pam cooking spray, Louis Kemp/
Bumblebee seafood products, Libbeys
canned meats, Guldens mustard
Case
PepsiCo brands: Pepsi soft drinks, Mountain

Dew, Frito-Lay snack foods, Tropicana juices
ConAgra brands: Armour, Banquet, Butterball,

Blue Bonnet and Parkay margarines, Chun
King, La Choy, Orville Redenbachers and
Act II popcorns, Peter Pan peanut butter,
County Line cheeses, Morton prepared foods,
Eckrich meats, Fleischmanns, Egg Beaters,
Healthy Choice, Hunts
Keebler brands: Keebler cookies; Murray

cookies; Keebler snack foods (Cheez-It,
Wheatables, Toasteds, Munchems, Harvest
Bakery, Snax Stix); Krispy and Zesta saltine
crackers; Club crackers; Hi-Ho crackers; Golden
Vanilla Wafers; Ready Crust pie shells
Nabisco brands: Nabisco cookies, crackers, and

snacks; Grey Poupon French mustards
Pillsbury brands: Pillsbury and Martha White

flours, baking mixes, and baking products;
Hagen-Dazs ice cream and frozen yogurt;
Green Giant frozen and canned vegetables;
Old El Paso Mexican foods; Totinos and
Jenos pizzas; Progresso; Hungry Jack
Brand Portfolio of Company Being Acquired

& Bestfoods
Kelloggs brands: Kelloggs cereals, Eggo, NutriGrain, Pop-Tarts, Kashi cereal and breakfast
bars, Rice Crispies Treats, SnackUms
Kraft Foods brands: Kraft cheeses, mayonnaise,

salad dressings, barbeque sauces, and dinners;
Post cereals; Jell-O; Velveeta; Cheez Whiz;
Cracker Barrel, Di Giorgo and Hoffmans
cheeses; Claussen pickles; Maxwell House,
Yuban, and Sanka coffees; Minute rice; Tobler
and Toblerone chocolates; Louis Rich and
Oscar Mayer meats; Miracle Whip; Shake N
Bake; Breakstone; Cool Whip; Planters; Kool-Aid;
Stove Top; Altoids
General Mills brands: Big G cereals (Wheaties,

Cheerios, Total, Lucky Charms, Trix, Chex,
Golden Grahams); Betty Crocker desserts and
side dishes; Gold Medal flours; Bisquick;
Hamburger Helper; Lloyds; Yoplait and Colombo
yogurts; Pop Secret; Chex Mix snacks; Nature
Valley, Bugles
Brand Portfolio of Acquiring Company
exhibit 3 Mergers and Acquisitions among Food and Household Products Companies in 2000
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toward retailers. Thus, competition between private-label goods and name-brand

goods in supermarkets was escalating rapidly, since retailers margins on private-label
goods often exceeded those on name-brand goods. The battle for market share between
private-label and name-brand goods was expected to continue as private-label manufacturers improved their capabilities to match the quality of name-brand products,
while also gaining the scale economies afforded by a growing market share.
Brand-name manufacturers were trying to counteract the bargaining power of large
supermarket chains and the growth of private-label sales by building a wide-ranging
portfolio of strong brandsthe thesis being that retailers, fearful of irritating shoppers
by not carrying well-known brands, would be forced to stock all of the manufacturers
name-brand products and, in many cases, award them favorable shelf space. At the
same time, because they faced pressures on profit margins in negotiating with retailers
and combating the competition from rival brands (both name-brand rivals and privatelabel rivals), manufacturers were trying to squeeze out costs, weed out weak brands, focus their efforts on those items they believed they could develop into global brands,
and reduce the number of versions of a product they manufactured wherever local market conditions allowed (to help gain scale economies in production).
Exhibit 4 provides a brief profile of selected competitors of Unilever. Other competitors included Sara Lee, H. J. Heinz, Kelloggs, and well over 100 regional and local food products companies around the world. Many of the leading food products
companies had a food-service division that marketed company products to restaurants, cafeterias, and institutions (such as schools, hospitals, college student centers,
private country clubs, corporate facilities) to gain access to the growing food-awayfrom-home market.
UNILEVERS BUSINESSES AND BRAND PORTFOLIO

Analysts familiar with the household products business and with Unilever were skeptical that there were meaningful strategic and resource fits between food products and
household/personal care products. Some saw Unilevers reorganization into a foods
group and a home and personal care group as a possible precursor to the breakup of
Unilever, an outcome denied by Unilever executives.
The Foods division, known as Unilever Bestfoods following the 2000 acquisition
and integration of Bestfoods, was organized around the six product categories: spreads
and dressings; tea and tea-based beverages; culinary products; frozen foods; ice cream;
and the global food-service business. The Foods division generated slightly more than
half of Unilevers sales. The Home and Personal Care (HPC) division consisted of
eight categories: deodorants, hair care, household care, laundry, mass skin care, oral
care, personal wash, and fragrances and cosmetics. The Foods Division and the Home
and Personal Care Division were each headed by a director who had global profit responsibility and executive authority for aligning brand strategy with operations worldwide.3 Underneath the division heads were directors for each product category and
regional presidents who were responsible for profitability in their respective regions.
Both divisions had an executive committeecomposed of the division director (acting
as chairperson), the directors for each product category, and the regional presidents
that was responsible for the overall results and performance of Unilever. Most research
and new product development activities were integrated into the divisional structure, but
the company had formed a small number of global innovation centers to interlink
3
Company press release describing the realignment of the senior management structure at Unilever,
August 3, 2000.
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exhibit 4
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Case
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Profile of Selected Unilever Competitors
Company
(Headquarters)
Product Categories/Brands
Sales
Profits
Key Facts
Nestl (Swiss)
Chocolates and candies (Nestl, Crunch,

KitKat, Smarties, Butterfinger, Cailler,
Frigor, Chokito, Galak/Milkybar, Yes,
Quality Street, Baci, After Eight, Baby
Ruth, Lion, Nuts, Rolo, Aero, Polo)
Dairy (Carnation, Milkmaid, Nespray, Nido,
Neslac, Gloria, Brenmarke)
Coffee (Nescaf, Tasters Choice, Bonka,
Zoegas, Ricoffy, Loumidis, Coffee-mate)
Beverages (Nesquik, Nestea, Carnation,
Libbys, Perrier, San Pellegrino, Poland
Spring, Calistoga, Vittel, Valvert,
Arrowhead, Buxton, Vera)
Frozen Foods (Stouffers, Maggi, Buitoni)
Culinary products (Maggi, Libbys, Crosse
& Blackwell, Buitoni)
Ice Cream (Nestl, Frisco, Dairy Farm)
Pet care (Friskies, Fancy Feast, Alpo,
Mighty Dog, Gourmet, Ralston Purina)
Cosmetics (LOral)
Others (PowerBar, Nestl cereal, Alcon
eye care products)
Food services
2000: Fr 81.4b*
1999: Fr 74.7b
1998: Fr 71.7b
1997: Fr 70.0b
1996: Fr 60.5b
2000: Fr 5.76b*
1999: Fr 4.72b
1998: Fr 4.20b
1997: Fr 4.18b
1996: Fr 3.59b
Worlds largest food

company with sales in
almost every country of
the world; 509 factories;
231,000 employees.
Procter & Gamble

(U.S.)
Baby care (Pampers, Luvs)

Laundry products (Tide, Cheer, Downy,
Bounce, Bold, Dreft, Era, Gain, Ivory
Snow, Ariel)
Household cleaners (Joy, Cascade, Dawn,
Comet, Mr. Clean/Top Job)
Food/Beverage (Folgers, Jif, Crisco,
Pringles, Sunny Delight, Millstone)
Health and oral care (Crest, Pepto-Bismol,
Metamucil, Vicks, Nyquil)
Feminine care (Always, Tampax)
Paper products (Bounty, Charmin, Puffs)
Personal care (Ivory, Camay, Safeguard,
Zest, Secret, Old Spice, Cover Girl, Max
Factor, Head & Shoulders, Olay, Pert,
Vidal Sassoon, Pantene, Physique,
Noxema, Hugo Boss)
Pet care (Iams)
2000: $40.0b
1999: $38.1b
1998: $37.2b
1997: $35.8b
1996: $35.3b
2000: $3.54b
1999: $3.76b
1998: $3.78b
1997: $3.42b
1996: $3.05b
Sales in over 140

countries; on-theground operations in
more than 70 countries,
110,000 employees;
and 300 brands. Tides
market share was over
4 times larger than its
nearest competitor; Ariel
laundry detergent was
sold in 115 countries
(with the highest or
second highest share in
25 countries). Tide and
Ariel had combined
sales greater than any
other P&G brand.
Colgate-Palmolive
(U.S.)
Oral care (Colgate toothpaste,

toothbrushes, dental floss; KolynosLatin
America)
Personal care (Irish Spring, Softsoap,
Protex, Palmolive, Speed Stick, Afta,
Mennen)
Household care (Palmolive, Ajax,
Murphys Oil, Javex)
Fabric care (Fab, Dynamo, Fleecy,
Suavitel, Ajax)
Pet foods (Hills Science Diet and
Prescription Diet)
2000: $9.36b
1999: $9.12b
1998: $8.97b
1997: $9.06b
1996: $8.75b
2000: $1.06b
1999: $0.94b
1998: $0.85b
1997: $0.74b
1996: $0.64b
Sales in over 200

countries and territories;
70% of sales outside
the United States; 38%
of 2000 sales came
from new products
introduced in past five
years.
*Swiss francs.
(continued)
ThompsonStrickland:
Edition
C-480
exhibit 4

& Bestfoods
The McGrawHill
Companies, 2002
Case
(continued)
Company
(Headquarters)
Kraft Foods (U.S.)
a subsidiary of
Philip Morris
Companies
Sales
Profits
Key Facts
Chocolates and candies (Life Savers,

Creme Savers, Altoids and Gummi
Savers; Cote dOr, Terrys, Gallito, Milka,
and Toblerone chocolate and confectionery products; Jell-O ready-to-eat
refrigerated desserts)
Snacks and crackers (Nabisco, Oreo,
Chips Ahoy!, SnackWells cookies; Ritz,
Premium, Triscuit, Wheat Thins, Cheese
Nips; Planters nuts; Balance Bar nutrition
and energy snacks; Lyux salty snacks;
Terrabusi, Canale, Club Social, Cerealitas,
Trakinas, Lucky biscuits)
Meats (Oscar Mayer and Louis Rich cold
cuts, hot dogs and bacon; Boca Burger
soy-based meat alternatives; Simmenthal
meats in Italy)
Cereals (Post Raisin Bran, Grape-Nuts
and other ready-to-eat cereals; Cream of
Wheat and Cream of Rice)
Culinary products (Jell-O, Cool Whip
frozen whipped topping; Miracle Whip;
Kraft and Good Seasons salad dressings;
A-1 steak sauce; Kraft and Bulls-Eye
barbecue sauces; Grey Poupon premium
mustards; Claussen pickles; Royal dry
packaged desserts and baking powder;
Kraft and ETA peanut butter; Vegemite
yeast spread, Miracoli pasta dinners and
sauces, Shake N Bake coatings)
Convenient meals (DiGiorno, Tombstone,
Jacks, and Delissio frozen pizzas; Kraft
macaroni & cheese dinners; Minute rice,
Stove Top meal kits; Lunchables)
Beverages (Maxwell House, General
Foods International Coffees, Yuban,
Jacobs, Gevalia, Carte Noire, Jacques
Vabre, Kaffe, HAG, Grand Mere, Kenco,
Saimaza, and Dadak coffees; Capri Sun,
Tang, Crystal Light, Country Time, Royal,
Verao, Fresh, Frisco, Q-Refres-Ko, and
Ki-Suco powdered soft drinks; Suchard
Express, OBoy, Milka and Kaba chocolate
drinks)
Cheeses (Kraft, Velveeta, Cracker Barrel,
Eden, and Dairylea cheeses; Philadelphia
cream cheese, Cheez Whiz process
cheese sauce; Knudsen and Breakstones
cottage cheese and sour cream)
2000: $26.5b
1999: $26.8b
1998: $27.3b
1997: $27.7b
1996: $27.9b
2000: $4.62b
1999: $4.25b
1998: $4.18b
1997: $4.20b
1996: $3.36b
International sales
accounted for about
35% of the total; Kraft
had 228 manufacturing
plants (147 outside the
United States) and 550
distribution centers and
depots (176 outside the
United States); in the
United States, Kraft
brands had number one
market share ranking
based on dollar volume
in 23 grocery and food
categories; in
international markets,
Kraft brands were
number one based on
unit volume in one or
more countries in 10
product categories.
(continued)
Operating earningsPhilip Morris does not report net income separately for its business divisions.
ThompsonStrickland:
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& Bestfoods
Case 22
exhibit 4
The McGrawHill
Companies, 2002
Case
C-481
(continued)
Company
(Headquarters)
Sales
Profits
Key Facts
Groupe Danone
(France)
Dairy (Danone and Dannon yogurts,

cream cheese, yogurt-style cheeses,
and fresh dairy desserts, Actimel,
Galbani, La Serenisima)
Bottled water (Evian, Volvic, Aqua,
Boario, Crystal Springs, Ferrarelle)
Biscuits and crackers (LU, Bagley,
Danone, Opavia, Bolshevik, Jacobs,
Saiwa, Britannia, Griffins, several
others)
Culinary (Lea & Perrins, HP steak sauce,
Amoy Asian products)
Baby foods (BldiniFrance)
Cheese (GalbaniItaly)
2000: 14.3b
1999: 12.9b
1998: 13.5b
1997: 12.8b
1996: 12.1b
2000: 721m
1999: 598m
1998: 559m
1997: 506m
1996: 325m
World leader in fresh

dairy products (15.1%
share worldwide);
bottled waters have a
number one market
share in several
countries and a 10.8%
share worldwide; LU
crackers was the
number one brand in
several countries in
Asia-Pacific region; had
a 9% market share in
biscuits/crackers
worldwide. Sales in 120
countries (38% outside
the European Union);
148 production plants,
86,000 employees.
Campbells Soup
(U.S.)
Soups (Campbells, Healthy Request,

Simply Home, Swansons broth, Liebeg,
Erasco, Homepride, Stock Pot)
Bakery (Pepperidge Farm, Arnotts)
Culinary (Pace, V8, Prego, Swansons,
Franco-American, Homepride Pasta
Bake, Kimball sauces)
Chocolates (Godiva)
2000: $6.27b
1999: $6.42b
1998: $6.70b
1997: $7.96b
1996: $7.68b
2000: $714m
1999: $724m
1998: $660m
1997: $713m
1996: $802m
Campbells was the

number one wet soup
brand in the world;
Arnotts was the market
leader in biscuits and
crackers in Australia
and was the number
two brand in New
Zealand; Pace, Liebeg,
V8, Pepperidge Farm.
Erasco, and Homepride
were also the market
leaders in their
segments.
(continued)
with R&D at the division level and the companys worldwide brand innovation organization. Unilevers local companies were the key interface with customers and consumers, responding to local market needs. Unilever executives saw the formation of
two global divisions as having three benefits:
Improving the companys focus on foods and HPC activities regionally and
globally.
Accelerating decision making and execution through tighter alignment of brand
strategy with operations.
Strengthening innovation capability through more effective integration of R&D
into the divisional structure and the creation of global innovation centers.
As part of the companys organizational restructuring, Unilever was closing 100

plants in Europe and North America, and trimming 25,000 jobs to concentrate production
ThompsonStrickland:
Edition
C-482
exhibit 4
Company
(Headquarters)
General Mills/
Pillsbury (U.S.)

& Bestfoods
The McGrawHill
Companies, 2002
Case
(concluded)
Flours and baking mixes (Pillsbury,
Martha White, Gold Medal, Bisquick,
Robin Hood)
Snacks and Beverages
Ice cream and dairy (Hagen-Dazs,
Yoplait and Trix yogurts)
Desserts (Betty Crocker)
Cereals (Cheerios, Wheaties, Total,
Lucky Charms, Trix, Cocoa Puffs, many
others)
Frozen and refrigerated foods (Green
Giant, Totinos, Pillsbury, Jenos)
Dinner mixes (Betty Crocker, Hamburger
Helper, Farmhouse)
Culinary (Progresso soups, Old El Paso
Mexican foods, Green Giant)
Snacks (Chex Mix, Nature Valley, Pop
Secret)
Food service
Sales
2000: $6.70b
1999: $6.25b
1998: $6.03b
1997: $5.61b
1996: $5.42b
Profits
2000: $614m
1999: $535m
1998: $422m
1997: $445m
1996: $476m
Key Facts
The acquisition of
Pillsbury in 2001 made
General Mills a $13
billion company with a
wider and stronger
product/brand portfolio;
still, about 95% of sales
were in the United
States.
Source: Compiled by the case researcher from company websites and company documents.
at 150 key sites and 130 ancillary sites. Efficiencies and cost savings associated with consolidating manufacturing were a key part of the companys Path to Growth plan to realize annual savings of 1.5 billion (after restructuring charges of 5.0 billion). In 2000,
Unilever spent about 1.2 billion for R&D and 6.5 billion on advertising and brands
promotions. Unilevers ice cream and beverage categories had a bad year in 2000, with
losses increasing from 22 million in the third quarter to 60 million in the fourth quarter, following a poor summer in Europe. Unilever said it had a cracking year in Asia,
while in Latin America management characterized the performance as a good recovery.
Interest charges in 2000 rose sharply to 632 million, up from 14 million in 1999, owing
to the debt-financed acquisitions.
The company had reduced its brand portfolio from 1,600 to 970 as of February
2001, with the top 400 accounting for 78 percent of total revenues in 2000. An additional 250300 brands had been targeted for pruning by 2002. Another 200 had been
designated as suitable for merger and migration into the product families of the top
400 brands. According to Niall FitzGerald, This [migration] is a complex process. No
one else has [done it] on this scale. It is easy to change a namethe marketing challenge is to bring the consumer with you.4 Also, by year-end 2000, 20 of the planned
100 factories had been closed, with related workforce reductions of 5,300 people.
Some analysts had criticized Unilever for paying too much for several of its acquisitions. For example, Unilever paid a purchase price of 715 million to acquire
Amora Maille (equal to 16.6 times Amora Mailles 1999 operating earnings of 43
million)a price well above the earnings multiples commanded by other food businesses and an amount said to be double what the present owners paid to acquire Amora
Maille from Group Danone in 1997. Unilever paid 14.1 times EBITDA (earnings
4
Quoted in Unilever Unveils Big Hit Innovations, Brand Cull Progress, Euromarketing via E-mail 4,
no. 3 (February 9, 2001).
ThompsonStrickland:
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& Bestfoods
Case 22
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Companies, 2002
Case
exhibit 5 Selected Financial Performance Statistics for SlimFast,

1997 through the First Quarter of 2000 (dollars in millions)
Sales revenues
Advertising and promotional expenditures
Earnings before interest, taxes, depreciation,
and amortization (EBITDA)
Earnings before interest and taxes (EBIT)
operating profits
EBIT % (operating profit margin)
1997
1998
1999
Q1 2000
$390
87
$505
102
$611
142
$194*
n.a.
78
117
133
n.a.
112
22.2%
125
20.5%
39
20.1%
76
19.4%
*Up 21% over Q1 1999.

Up 28% over Q1 1999.
Source: www.unilever.com, April 17, 2001.
before interest, taxes, depreciation, and amortization) for Bestfoodsa record high for
a foods company and above the 12.8 times EBITDA that Philip Morris/Kraft paid
for Nabisco and the 12.1 times EBITDA that PepsiCo paid for Tropicana in 1999.
Unilever defended its price for Amora Maille, saying it was justified based on the superior growth prospects the business would deliver relative to other grocery products
and on the 19.3 times EBIT (earnings before interest and taxes) that PepsiCo paid for
Tropicana in 1999 and the 16.5 times EBIT that Frito-Lay paid for Australia-based
Smiths Snackfoods Company in 1997.
THE SLIMFAST ACQUISITION

Two months after announcing the new Path to Growth strategy in February 2000,
Unilever negotiated an agreement to acquire SlimFast diet foods for $2.3 billion cash.
SlimFast, a privately held company headquartered in Miami, Florida, was the U.S.
market leader, with a 45 percent market share, in the $1.3 billion North American
weight management and nutritional supplement industry. The companys nearest competitor had a market share of just over 25 percent. SlimFast had sales of $611 million
in 1999, up 20 percent over 1998 (see Exhibit 5); the companys net assets totaled $160
million at the time of acquisition. SlimFasts ready-to-drink selections (72 percent of
total sales), powders (16 percent), and bars (12 percent) all had the leading positions in
their category segments. An estimated 2 million U.S. consumers used SlimFast products daily, and an additional 5 million used SlimFast products occasionally. About 94
percent of SlimFasts sales were in North America. Studies showed the SlimFast brand
name had an unaided 89 percent recognition rate among U.S. consumers. SlimFast
produced a portion of its products at a company-owned manufacturing facility in Tennessee and sourced the remainder from contract suppliers. It had a strong sales and distribution network, having been successful in gaining shelf space in most supermarkets
and drugstores, and had spent over $400 million on advertising and promotion during
the past four years.
The companys products were made from natural ingredients supplemented with
added vitamins and minerals to provide a strong nutritional profileno appetite suppressants were used. Promotional efforts centered on the themes of good health, balanced nutrition, great taste, and convenient product formats (ready-to-drink products,
powders, and bars). SlimFast had conducted extensive clinical trials to validate the performance of its products. The company had a strong physician education program and
C-483
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Case
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Companies, 2002
enjoyed good relationships with the U.S. Food and Drug Administration (FDA) and
other regulatory agencies.
Unilever was attracted to SlimFast because the company was growing about 20
percent annually and because people all across the world were increasingly interested
in living a longer, healthier, and more vital life. Market research indicated that in the
United States, Germany, and the United Kingdom nutrition was the number one dietary
concern and that weight was number three. In the United States, Western Europe, Australia, and the largest cities in the rest of the world, between 40 and 55 percent of the
population were overweight and 15 to 25 percent were obese. According to the World
Health Organization, the number of people who were either overweight or obese was
increasing at an alarming rate.
Unilever management saw opportunities to use the companys global distribution
capabilities to introduce SlimFast in Europe, Australia, and cities in developing countries, perhaps doubling SlimFasts sales within two to three years. According to independent market research, the world market for diet products and nutritional foods was
about $31.7 billion annually and was growing annually at 11.3 percent. Unilever executives believed SlimFast products would appeal to weight-conscious Europeans; according to co-chairman Antony Burgmans, Europe at the moment is underdeveloped. We
are in a perfect position to boost the presence of this brand.5 Company projections indicated that SlimFast would begin to contribute positively to Unilevers cash flows in 2002
and to earnings in 2003. Unilever believed that SlimFast had a strong management team.
THE BEN & JERRYS ACQUISITION

After considering offers from Unilever, Diageo (at the time, the parent company of
arch-rival Hagen-Dazs), Nestl, Roncadin (an Italian company), and Dreyers (a rival
maker of super premium ice cream products and a long-time distributor of Ben &
Jerrys products), the board of directors of Ben & Jerrys Homemade, Inc., in April
2000 agreed to accept Unilevers offer of $43.60 for all of the companys 7.48 million
shares, resulting in an acquisition price of $326 million. The $43.60 price represented
a premium of 23 percent over the closing price the day prior to the announcement of
the agreement and was well above the $15.80 to $20.00 range the stock traded in prior
to the five buyout offers becoming public knowledge in December 1999. Exhibit 6
shows Ben & Jerrys recent financial highlights. The Ben & Jerrys acquisition put
Unilever in the high-end superpremium segment of the ice cream market for this first
time and made Unilever the worlds large marketer of ice cream products.
Company Background
Ben & Jerrys began active operations in 1978 when Ben Cohen and Jerry Greenfield,
two former hippies with counterculture lifestyles and very liberal political beliefs,
opened a scoop shop in a renovated gas station in Burlington, Vermont. Soon thereafter, the cofounders decided to package their ice cream in pint cartons and wholesale
them to area groceries and mom-and-pop storestheir logo became Vermonts Finest
All Natural Ice Cream and the carton design featured a picture of the cofounders on
the lid and unique handstyle lettering to project a homemade impression. The cartons
were inscribed with a sales pitch by Ben and Jerry:
This carton contains some of the finest ice cream available anywhere. We know because
were the guys who made it. We start with lots of fresh Vermont cream and the finest
5
Quoted in an article by Mark Bendeich, Unilever Buys U.S. Health Foods Firm for $2.3 billion, and
posted at www.economictimes.com, April 12, 2000.
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& Bestfoods
Case 22
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Companies, 2002
Case
C-485
exhibit 6 Financial Performance Summary, Ben & Jerrys Homemade, Inc., 199499
(in thousands except per share data)
Income statement data

Net sales
Cost of sales
Gross profit
Selling, general &
administrative expenses
Special charges*
Other income (expense)net
Income (loss) before income taxes
Income taxes
Net income (loss)
Net income (loss) per sharediluted
Shares outstandingdiluted
Balance sheet data
Working capital
Total assets
Long-term debt and capital lease
obligations
Stockholders equity
1999
1998
1997
1996
1995
1994
$237,043
145,291
91,752
$209,203
136,225
72,978
$174,206
114,284
59,922
$167,155
115,212
51,943
$155,333
109,125
46,208
$148,802
109,760
39,042
78,623
8,602
681
5,208
1,823
3,385
$
0.46
7,405
63,895
53,520
45,531
36,362
693
9,776
3,534
6,242
0.84
7,463
(118)
6,284
2,388
3,896
0.53
7,334
(77)
6,335
2,409
3,926
0.54
7,230
(441)
9,405
3,457
5,948
0.82
7,222
36,253
6,779
228
(3,762)
(1,869)
(1,869)
$ (0.26)
7,148
$ 42,805
150,602
$ 48,381
149,501
$ 51,412
146,471
$ 50,055
136,665
$ 51,023
131,074
$ 37,456
120,296
16,669
89,391
20,491
90,908
25,676
86,919
31,087
82,685
31,977
78,531
32,419
72,502
*The special charge in 2000 concerned a writedown of Springfield, Vermont, plant assets and employee severance costs associated with
outsourced novelty ice cream products. The 1994 charge stemmed from early replacement of certain software and equipment installed at
the plant in St. Albans, Vermont, and included a portion of the previously capitalized interest and project management costs.
No cash dividends have been declared or paid by the company on its capital stock since the companys organization in 1978. Earnings
were used to provide needed working capital and to finance future growth.
Source: Company annual reports.
flavorings available. We never use any fillers or artificial ingredients of any kind. With our
specially modified equipment, we stir less air into the ice cream, creating a denser, richer,
creamier product of uncompromising high quality. It costs more and its worth it.
A Time magazine article on the superpremium ice cream craze appeared in August
1981 with the opening sentence, What you must understand is that Ben & Jerrys in
Burlington, Vermont, makes the best ice cream in the world. Sales at Ben & Jerrys
took off, rising to $10 million in 1985 and to $78 million in 1990. By 1994, Ben &
Jerrys products were distributed in all 50 states, the company had 100 scoop shops,
and it was marketing 29 flavors in pint cartons and 45 flavors in bulk cartons.
Products and Operations in 2000

Headquartered in Burlington, Vermont, Ben & Jerrys in 2000 produced and marketed
over 50 superpremium ice cream flavors, ice cream novelties, low-fat ice cream
flavors, low-fat frozen yogurts, and sorbets, using Vermont dairy products and highquality, all-natural ingredients. Like other superpremium ice creams, Ben & Jerrys
products were high in calories (about 300 per serving), had a fat content equal to 40 to
55 percent of the recommended daily allowance for saturated fat per serving, and were
high in cholesterol content (20 to 25 percent of the recommended daily allowance).
About 35 of the flavors were packaged in pint cartons for sale in supermarkets, grocery
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stores, and convenience stores; the rest were packaged in bulk tubs for sale in about
200 franchised and company-owned Ben & Jerrys scoop shops, restaurants, and foodservice accounts. To stimulate buyer interest, the company came up with attentiongetting names for its flavors: Chunky Monkey, Chocolate Chip Cookie Dough,
Bovinity Divinity, Coconut Cream Pie, Chubby Hubby, Double Trouble, Totally Nuts,
and Coffee Ol. Many of the flavors contained sizable chunks of cookies or candies, a
standout attribute of the companys products. Retail prices for a pint of Ben & Jerrys
were around $3.25 in May 2001.
At year-end 1999, Ben & Jerrys had 164 franchised scoop shops; 8 PartnerShop
franchises (not-for-profit organizations that operated scoop shops); 19 Featuring Franchises (scoop shops within airports, stadiums, college campus facilities, and similar
venues); 12 Scoop Station franchises (prefabricated units that operated within other
large retail establishments); and 9 company-owned scoop shops (4 in Vermont, 2 in
Las Vegas, and 3 in Paris, France). Internationally, there were nine franchised Ben &
Jerrys scoop shops in Israel, four in Canada, three in the Netherlands, one in Lebanon,
and one in Peru. The company began exporting from its Vermont plants to Japan in
1997, selling single-serve containers through an exclusive arrangement with 7-Eleven
Japan. In 1999, it established a wholly owned subsidiary in Japan for the purpose of
importing, marketing, and distributing its products through Japanese retail grocery
stores. Beginning in January 2000, Ben & Jerrys imported all products into Japan
through an agreement with a Japanese trading company.
Distribution The companys products were distributed throughout the United

States and in several foreign countries. Company trucks, along with several local distributors, handled deliveries to retailers in Vermont and upstate New York. In the rest
of the United States, Ben & Jerrys relied on distribution services provided by other ice
cream manufacturers and marketers. It was the distributors job to sell retailers on
stocking a brand, deliver supplies to each retail location, and stock the freezer cases
with the agreed-on flavors and number of facings. Up until 1998, Ben & Jerrys utilized two primary distributors, Suts Premium Ice Cream for much of New England
and Dreyers Grand Ice Cream for states in the Midwest and West. To round out its national coverage, the company had a number of other distributors that serviced limited
market areas. In 1994, Dreyers accounted for 52 percent of Ben & Jerrys net sales.
The arrangement with Dreyers was somewhat rocky, and in 1998 Ben & Jerrys began
redesigning its distribution network to gain more company control. Under the redesign,
Ben & Jerrys increased direct sales calls by its own sales force to all grocery and
convenience store chains and set up a network where no distributor had a majority percentage of the companys sales. Starting in 1999, much of the distribution responsibility in certain territories was assigned to Ice Cream Partners (a joint venture of Nestl
and Pillsbury, the parent of Hagen-Dazs); the balance of U.S. deliveries was assigned
to Dreyers and several other regional distributors, but Dreyers territory was smaller
than before and entailed Ben & Jerrys receiving a higher price than formerly for products distributed through Dreyers.
Manufacturing Ben & Jerrys operated three manufacturing plants, two shifts a
day, five to seven days per week, depending on demand requirements. Superpremium
ice cream and frozen yogurt products packed in pint cartons were manufactured at the
companys Waterbury, Vermont, plant. The companys Springfield, Vermont, plant was
used for the production of ice cream novelties and ice cream, frozen yogurt, low-fat ice
cream, and sorbets packaged in bulk, pints, quarts, and half gallons. The St. Albans,
Vermont, plant manufactured superpremium ice cream, frozen yogurt, frozen smoothies, and sorbet in pints, 12-ounce, and single-serve containers. Beginning in October
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1999, in order to reduce costs and improve its profit margins, the company ceased production of ice cream novelties at its Springfield plant and began outsourcing its requirements from third-party co-packers.
Competitors
Ben & Jerrys two principal competitors were Dreyers/Edys (which had introduced
its Dreamery and Godiva superpremium brands in 1999) and Hagen-Dazs (part of
Pillsburywhich was formerly a subsidiary of Diageo but which was acquired by
General Mills in 2000see Exhibit 3). Other significant frozen dessert competitors
were Colombo frozen yogurts (a General Mills brand), Healthy Choice ice creams (a
ConAgra brand), Breyers ice creams and frozen yogurts (Unilever), Kemps ice cream
and frozen yogurts (a brand of Marigold Foods), and Starbucks (whose coffee ice
cream flavors were distributed by Dreyers). In the ice cream novelty segment, Ben &
Jerrys products (SMores, Phish Sticks, Vanilla Heath Bar Crunch pops, Cookie
Dough pops, Cherry Garcia frozen yogurt pops, and several others) competed with
Hagen-Dazs bars, Dove bars (made by a division of Mars, Inc.), Good Humor bars (a
Unilever brand), an assortment of Nestl products, and many private-label brands.
Hagen-Dazs was considered the global market leader in the superpremium segment, followed by Ben & Jerrys. Ben & Jerrys had only a negligible market share in
ice cream novelties and a low single-digit share of the frozen yogurt segment. Whereas
close to 90 percent of Ben & Jerrys sales were in the United States, Hagen-Dazs was
represented in substantially more foreign markets, including markets in Europe, Japan,
and other Pacific Rim countries. Like Ben & Jerrys, Hagen-Dazs marketed several
ice cream flavors using pieces of cookies and candies as ingredients.
Management and Culture

Since 1988 Ben & Jerrys had formalized its business philosophy by adopting and pursuing a three-part mission statement:
Product mission: To make, distribute, and sell the finest quality all-natural ice
cream and related products in a wide variety of innovative flavors made from Vermont dairy products.
Economic mission: To operate the company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees.
Social mission: To operate the company in a way that actively recognizes the
central role that business plays in the structure of society by initiating innovative
ways to improve the quality of life of a broad communitylocal, national, and
international.
Pursuing the Company Mission The three parts of the mission were
deemed equally important, and management strived to integrate their pursuit in its dayto-day business decision making. Starting in 1988, the companys annual report had
contained a social report on the companys performance during the year, with emphasis on workplace policies and practices, concern for the environment, and the social mission accomplishments. To support its social mission activities, Ben & Jerrys
had a policy of allocating 7.5 percent of pretax income (equal to $1.1 million in 1999)
to support various social causes through the Ben & Jerrys Foundation, corporate
grants made by the companys director of social mission development, and employee
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community action teams. In addition, the company made a practice of sourcing some
of its ingredients from companies that gave jobs to disadvantaged individuals who
would otherwise be unemployed, strived to operate in an environmentally friendly
manner, and partnered with environmentally and socially conscious organizations
working to make the world a healthier and more humane place. Over the years, the
company had been actively involved with hundreds of grassroots organizations working for progressive social change, including Greenpeace, the Childrens Defense Fund,
the National Association of Child Advocates, the Coalition for Environmentally Responsible Economies, the Environmental Working Group, and the Institute for Sustainable Communities. It had contributed to efforts to save the rain forests in Brazil.
One day each year, the company hosted a free cone day at its scoop shops as a way
of thanking customers for their patronage.
Ben & Jerrys had selected Vermont communities with high unemployment rates
for all three of its plants. It had created a blueberry ice cream so it could buy blueberries
exclusively from a tribe of Maine Indians and help support their economy. In 1991, Ben
& Jerrys had entered into an agreement with St. Albans Cooperative Creamery (a group
of Vermont dairy farmers) to pay not less than a specified minimum price for its dairy
products in order to bring prices up to levels the company deemed fair and equitable. In
1994, this agreement was amended to include, as a condition of paying the premium
price, assurance that the milk and cream purchased by the company would not come
from cows that had been treated with recombinant bovine growth hormone (rBGH), a
synthetic growth hormone approved by the FDA. The company quit selling a handmade
brownie-and-ice-cream sandwich upon discovering that workers hands were developing repetitive strain injuries. In 1999, Ben & Jerrys became the first U.S. ice cream
company to convert a significant portion of its pint containers to a more environmentally friendly unbleached paperboard. (Bleaching paper with chlorine to make it whiter
was said to be one of the largest causes of toxic water pollution in the United States.)
Company Culture The work environment at Ben & Jerrys was characterized by
informality, casual dress, attempts to make the atmosphere fun and pleasurable, and
frequent communications between employees and management. Ben Cohen was noted
for not owning a suit. Efforts were made to treat employees with fairness and respect;
employee opinions were sought out and given serious consideration. Rank and hierarchy were viewed with distaste, and until the late 1990s executive salaries were capped
at no more than seven times the pay for entry-level jobs. Compensation levels were
above average, compared to pay scales in the Vermont communities where Ben &
Jerrys operated. Ben & Jerrys had instituted a very liberal benefits package for its
nearly 850 employees that included health benefits for the gay or lesbian partners of
employees, maternity leave for fathers as well as mothers, leave for the parents of
newly adopted children, $1,500 contributions toward adoption costs, on-site cholesterol and blood pressure screening, smoking cessation classes, tuition reimbursement
for three classes per year, a profit-sharing plan, a 401(k) plan, an employee stock purchase plan that allowed employees to buy shares 15 percent below the current market
price, a housing loan program, a sabbatical leave program, free health club access, and
free ice cream. Nonetheless, the company had experienced occasions where employees expressed dissatisfaction with one or another aspects of their jobs; the periodic
meetings management held to discuss issues and concerns with employees had often
provoked hot debates.
Ben & Jerrys had long prided itself on treating workers so fairly that they did not
need and would not want to be represented by a union. But in late 1998 the company
became embroiled in a union controversy at its St. Albans plant, where the International Brotherhood of Electrical Workers (IBEW) was trying to organize a group of 19
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maintenance workers. Management refused the IBEWs request to recognize the union
voluntarily. Company lawyers, appearing before the National Labor Relations Board
(NLRB), opposed the IBEW organizing attempt, arguing that the vote should be held
among all workers at the plant, not just among the 19 maintenance workers. Production workers, who made up the majority of the plants workforce, did not support the
unions organizing effort as strongly. In early 1999, following an NLRB ruling that the
maintenance workers at the St. Albans plant were an appropriate bargaining unit, the
19 maintenance workers voted narrowly for representation by the IBEW. Even though
the 19 workers constituted less than 3 percent of the companys full-time workforce,
top management at Ben & Jerrys was concerned that the voting outcome raised questions about the quality of employer-employee relations at Ben & Jerrys.
Management Changes
When Ben Cohen, the creative driving force in the

company from the beginning, decided to step down as CEO in 1994, the search for a
replacement included an essay contest in which anyone wishing to be considered for
the CEO position was asked to state in 100 words or less why I want to be a great
CEO for Ben & Jerrys. Robert Holland, a former consultant at McKinsey & Co., was
selected to become the companys CEO in February 1995; he helped transition the
company from a founder-led to a professional management structure and helped begin
the companys ventures into international markets. Holland resigned in October 1996,
partly because of growing disagreements with the founders over how the company was
being operated; he was replaced by Perry Odak, who had held senior management positions at Armour-Dial, Atari, Jovan, Dellwood Foods (a dairy products company), and,
most recently, at U.S. Repeating Arms Co. (the maker of Winchester firearms) and
Browning, a manufacturer of firearms and other sporting goods.
Company Image and Events Leading Up to the Acquisition Ben &

Jerrys counterculture values, unconventional policies, and passionate commitment to
social causes were widely known and, in many respects, had emerged as the companys biggest brand asset. Frequent and usually favorable stories in the New England
and national press describing Ben & Jerrys proactive approach to caring capitalism
had fostered public awareness of the company and helped mold a very positive image
of the company and its business philosophy. Indeed, substantial numbers of the companys customers patronized Ben & Jerrys ice cream products because they were suspicious of giant corporations, shared many of the same values and beliefs about how a
company ought to conduct its business, and wanted to support the companys efforts
and good deeds. So strong was the anti-big-business feeling of some customers, employees, and shareholders that, when the press reported Ben & Jerrys was considering
various acquisition offers, there were protest rallies at company facilities in Vermont
and a Save Ben & Jerrys website (www.savebenandjerrys.com) sprang up for followers to express their displeasure and to help mount a public relations campaign to block
a sale. Hundreds of messages were posted at the siteone message said, My friend
and I will not buy Ben & Jerrys again if you sell out. It would not taste the same.
Most messages conveyed concerns that Ben & Jerrys would lose its character and social values, ceasing to be a model for other businesses to emulate. Vermonts governor
told Reuters, This company has really come to symbolize Vermont to the country and
the world. It would be a shame if it were sucked into the corporate homogenization
thats taking over the planet.6
Reportedly, neither Ben Cohen nor Jerry Greenfield was enthusiastic about selling
the company; both had publicly expressed their desires for the company to remain in6
Quoted in an article by Mike Mills in The Vermont Post, December 9, 1999.
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dependent. But the companys languishing stock price and the attractive offers of interested buyers forced the board of directors to consider being acquired. To counter an
offer of $38 per share from Dreyers, Ben Cohen had entered into negotiations with
Meadowbrook Lane Capital (one of the companys large shareholders) and others to
take the company private. This fell through when Unilever made its offer of $43.60 per
share. In agreeing to accept Unilevers price, Cohen netted over $39 million for his
controlling interest in the company, while Odak received over $16 million and Greenfield got $9.6 million. A substantial fraction of Ben & Jerrys 11,000 shareholders were
Vermont (or former Vermont) residents.
Developments Following the Acquisition

To win approval for the acquisition from the cofounders and the board, Unilever
agreed to keep Ben & Jerrys headquarters in Vermont, to operate the company separately from Unilever for a period of time, to maintain employment at current levels for
at least two years, to hold employee benefits at current levels for at least five years, and
to contribute 7.5 percent of pretax income annually to the Ben & Jerrys Foundation
(historically, the foundation had been managed by a nine-member employee board of
directors that considered proposals relating to children and families, disadvantaged
groups, and the environment). Unilever further agreed to form an independent 11member board of directors for Ben & Jerrys to monitor how well these conditions
were being met, with 8 of the board members to be named by Ben & Jerrys management, 1 by Unilever, and 2 by Meadowbrook Lane Capital. Ben Cohen and Jerry
Greenfield were also to continue to have active roles in management.
In a joint statement announcing the acquisition, Unilevers co-chairmen said, Ben
& Jerrys is an incredibly strong brand name with a unique consumer message. We are
determined to nurture its commitment to community values. Ben Cohen said, The
best and highest use for Ben & Jerrys is to try to influence what goes on at Unilever.
Its a gargantuan task. Who knows how far well get? Who knows how successful
well be?
In November 2000, Unilever announced that Yves Couette had been appointed
CEO of Ben & Jerrys, to succeed existing CEO Perry Odak. Couette, a native of
France, was one of the top executives in Unilevers ice cream group and had worked
in the United States, Mexico, Indonesia, and the United Kingdom. Couette had recently been managing director of Unilevers ice cream business in Mexico, where he
had turned Unilevers Helados Holanda business into a solid success with distinctive
local brands and scoop shops. In commenting on his appointment, Couette said,
Ben & Jerrys is a unique company, with highly professional and committed people from
whom I look forward to learning and connecting to Unilevers world-class knowledge
of ice cream. In addition, I am determined to deliver on Ben & Jerrys social mission
commitment.
Perry Odak remained with the company until January 2001 to assist Yves Couette in
the transition.
THE BESTFOODS ACQUISITION

Bestfoods was a global company engaged in manufacturing and marketing consumer
foods. The company had offices and manufacturing operations in 60 countries and marketed its products in 110 countries. About 60 percent of the companys $8.6 billion in
sales in 1999 came from outside the United States. Bestfoods employed approximately
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44,000 people, of which about 28,000 were at non-U.S. locations. Food industry analysts considered Bestfoods to be one of the best-managed American food companies,
and it was one of the 10 largest U.S.-based food products companies at the time it was
acquired by Unilever. Once known as CPC International, the company renamed itself
Bestfoods after spinning off its cyclical $1.5 billion corn refining business in late 1997.
Exhibit 7 shows Bestfoods product portfolio in mid-2000 when Unilever first offered to acquire the company. During the decade of the 1990s, Bestfoods had grown
revenues at a 7.8 percent annual rate, operating earnings at a 10.5 percent annual rate,
and earnings per share at a 12.1 percent annual rate; the company had increased its dividends for 14 consecutive years. Growth had slowed during the 199799 period, however. In 1999, Bestfoods sales were up 2.7 percent over 1998, unit volumes were up
4.1 percent, and operating income was up 9.0 percent (see Exhibit 8). Bestfoods corporate strategy had four core elements:
Globalization of the companys core consumer businessesthe Knorr product

line, salad dressings, and food-service operations.
Continual improvement in cost-effectiveness.
Seeking out and exploiting new market opportunities (via both new product introductions and extending sales of existing products to additional country markets).
Using free cash flow to make strategic acquisitions. Since the 1980s, Bestfoods
had made over 60 acquisitions to expand its lineup of products and brands and to
position the company in new geographic markets.
Exhibits 9 and 10 show Bestfoods recent performance and market positions in various
country markets.
After several weeks of back-and-forth negotiations and increases in Unilevers offer price from the $61$64 per share range to $66 per share to $72 per share and finally
to $73 per share, Bestfoods in June 2000 agreed to be acquired by Unilever for what
amounted to $20.3 billion in cash (equivalent to 23.6 billion), plus assumption of
Bestfoods net debt (which amounted to $3.1 billion as of June 30, 2000). The $73 per
share buyout agreement represented a price 44 percent higher than the nearly $51 price
at which Bestfoods shares were trading before Unilevers overtures became public and
represented about a 20 percent premium over the $59$62 range where Bestfoods
shares were trading in late 1999. Bestfoods was, by far, the largest acquisition ever undertaken by Unilever and the largest combination of food companies in 12 years.
Unilever management believed that combining and integrating the operations of
Bestfoods and Unilever would result in pre-tax cost savings of approximately $750
million annually through combined purchase savings, greater efficiencies in operations
and business processes, synergy in distribution and marketing, streamlining of general
and administrative functions, and increased economies of scale. In addition, management said that the complementary nature of Unilevers and Bestfoods product portfolios and geographic market coverage better positioned the combined company for
faster revenue growth through:
Creating a more robust combined business in the U.S. market.

Maximizing the complementary strengths of Unilever and Bestfoods in Europe.
Building on the strength of Bestfoods in Latin America to accelerate the growth of
Unilevers brands.
Using Unilevers distribution network strengths in the Asia-Pacific area to grow
the sales of Bestfoods brands.
Utilizing Bestfoods food-service channel to gain increased sales for Unilevers
portfolio of spreads, teas, and culinary products.
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exhibit 7

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Companies, 2002
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Bestfoods Product Portfolio, June 2000
Products/Brands
Comments
Hellmanns mayonnaise and salad dressings; Bestfoods,

Ladys Choice, and Lesieur mayonnaise and salad
dressings; Dijonnaise creamy mustard; Henris and
Western salad dressings
Worldwide sales of about $2 billion, with the leading

market share in mayonnaise in North America, Latin
America, and many countries of Asia and Europe. In
parts of the United States, Hellmanns products were
marketed under the Bestfoods brand; Lesieur
mayonnaise products were marketed in France and
had the second highest market share in that country.
Knorr dry soups, sauces, bouillons, and related products
Worldwide sales of about $3 billion. Knorr products

were sold in virtually all of the 110 countries where
Bestfoods had a market presence. It was the number
two soup brand, behind Campbells.
Mazola corn and canola oils and Mazola margarine;

Mazola No-Stick and Pro Chef cooking sprays;
RightBlend oils
Marketed in 35 countries.
Skippy peanut butter
One of the leading brands in the United States and

also strong in parts of Asia
Karo and Golden Griddle syrups

Argo, Kingsfords, Canada, Bensons, and Maziena
corn starches
The Maziena brand of corn starch and other basic

nutritional foods was marketed primarily in Latin
America.
Muellers pastas
Rit dyes and laundry products
Entemanns bakery goods; Thomas English muffins;
Arnold, Brownberry, Oroweat, and Freihofers breads;
Boboli pizza crusts
The Bestfoods Baking division was the largest baker

of fresh premium products in the United States;
Entemanns was the number one brand of fresh
bakery-style cakes and pastries in the United States;
Boboli had a 57 percent share of the market for fresh
pizza crusts; Bestfoods total sweet baked goods share
was 19.2 percent in 1998.
Glaxose-D energy drinks
A newly-acquired business in Pakistan.
Globus dressings, condiments, and liquid sauces
A newly-acquired brand in Hungary.
Alsa and Ambrosia ready-to-eat desserts, dessert

mixes, and baking aids
Marketed primarily in Europe; sales of about $280

million in 1999.
AdeS soy beverages
Marketed throughout Latin America.
Captain Cook salt
A packaged salt business in India.
Bestfoods (in the United States) and Caterplan

(outside the United States) food services
Provided food-service packs of company products,

specially formulated products, and menu-planning and
other unique services to support restaurants,
cafeterias, and institutions in the growing global
market for food prepared and consumed away from
homegeographic coverage in virtually all of the
countries where Bestfoods operated. The food-service
division had worldwide sales of $1.4 billion in 1999.
Others: Pfanni potato products (Germany), Pot Noodle

instant hot snacks (United Kingdom), Telma soups and
instant foods products (Israel), Bovril bouillons, Marmite
spread, Santa Rosa jams, Sahara pita breads, Goracy
Kubek instant soups (Poland), Delikat seasonings
(Central Europe), Molinos de la Plata mayonnaise,
ketchup, and mustard (Argentina)
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exhibit 8 Selected Financial Statistics for Bestfoods, 199799

(in millions of dollars, except for per share amounts)
Selected income statement data

Net sales
Cost of sales
Gross profit
Marketing expenses
Selling, general, and administrative expenses
Operating income
Financing costs
Income from continuing operations before income taxes
Provision for income taxes
Net income
Earnings per share of common stock (diluted)
Selected balance sheet data
Inventories
Current assets
Plant, property, and equipment
Intangible assets, including goodwill associated with
acquiring businesses at costs exceeding net assets
Total assets
Current liabilities
Long-term debt
Total stockholders equity
Selected cash flow data
Net cash flows from operating activities
Capital expenditures
Payments for acquired businesses
Net cash flows used for investing activities
Repayment of long-term debt
Dividends paid on common and preferred stock
Net cash flows used for financing activities
1999
1998
1997
$8,637
4,546
4,091
996
1,765
1,330
183
1,147
384
$ 717
$ 2.48
$8,413
4,562
3,851
976
1,655
1,187
166
1,021
352
$640
$ 2.09
$8,438
4,693
3,745
978
1,659
866
162
704
250
$ 429
$ 1.15
$ 792
2,204
1,964
$ 827
2,405
1,965
$ 818
2,188
1,941
1,811
6,232
2,368
1,842
938
1,854
6,435
2,312
2,053
981
1,742
6,100
2,347
1,818
1,042
$1,110
278
225
477
153
295
697
$ 819
304
121
264
94
277
440
$ 915
321
298
732
99
256
267
Source: Company annual reports, 1998 and 1999.
According to a statement issued by Antony Burgmans and Niall FitzGerald, the

Bestfoods acquisition would give Unilever a portfolio of powerful worldwide and regional brands with strong growth prospects. Knorr, with $3 billion in annual sales,
would become Unilevers biggest food brand.
To finance the $21.4 billion Bestfoods acquisition, Unilever arranged for a $20 billion line of credit from several banks, with annual interest costs that analysts expected
to exceed $1 billion. It was anticipated that Unilever would ultimately finance the
transaction with longer-term debt securities having a currency profile paralleling the
geographic composition of the business.
In February 2001, Unilever announced the sale of the Bestfoods Baking Company
to George Weston, a Canadian food and supermarkets group, for $1.76 billion in cash.
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exhibit 9

& Bestfoods
The McGrawHill
Companies, 2002
Case
Summary of Bestfoods Worldwide Business Results, 199799

1999 Sales and Operations, by Geographic Region
Geographic Region
Sales Revenues
(in millions)
Europe, Africa/
Middle East
1999
1998
1997
1999
1998
1997
1999
1998
1997
1999
1998
1997
North America
Latin America
Asia
Fixed Assets
(in millions)
$3,598
3,490
3,539
$3,594
3,452
3,412
$1,071
1,149
1,105
$ 374
322
382
1999
1998
1997
1999
1998
1997
1999
1998
1997
1999
1998
1997
$1,568
1,809
1,637
$1,682
1,507
1,547
$ 277
284
291
$ 124
120
101
Areas of
Operation, 1999
Number of
Plants, 1999
Operations in 33 countries of
Europe, Africa, and Middle East
59
Operations in the U.S. Canada,

and the Caribbean
36
Operations in 16 countries
19
Operations in 12 countries, including

joint ventures in 7 countries
18
1999 Sales by Product Group

Product Group
Region
Knorr soups, sauces, bouillons

and related products
Europe
North America
Latin America
Asia
Total/average
Europe
North America
Latin America
Asia
Total/average
United States
Worldwide
Worldwide
Worldwide
Worldwide
Dressings
Baking
Starches
Bread Spreads
Desserts
All other sales
Bestfoods and Caterplan
food services
Worldwide
Sales
(in millions)
$2,091
470
342
185
$3,088
$464
1,001
443
96
$2,004
$1,697
$569
$406
$280
$593
$1,400
(distributed across
several of the product
groups above)
% Change
4.2%
10.3
9.0
17.0
4.1%
2.7%
4.8
5.7
14.0
2.2%
8.4%
Volumes
9.8%
10.3
7.6
25.0
6.8%
7.9%
5.4
1.7
10.2
5.4%
Included in the
appropriate
product groups
above
Unilever had announced its intention to divest Bestfoods Baking Company two weeks
after closing its merger with Bestfoods on October 4, 2000, noting that the characteristics of the baking business did not fit other Unilever products and that bakery products
was a category no longer in existence at Unilever. Bestfoods Baking was entirely U.S.based, with 19 plants across the country, a strong management team, 12,000 employees,
and one of the best distribution systems for delivering fresh-baked products directly to
retail stores. In 1999, Bestfoods Baking had sales of $1.7 billion (up 2.3 percent over
1998) and an operating profit margin of 8 percent (good for the baking business).
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Africa/Middle East
Egypt
Israel
Jordan
Kenya
Morocco
Saudi Arabia
South Africa
Tunisia
Turkey
1
2
1
1
2
2
2
1
1
1
1
1
1
2
2
1
2
1
1
2
1
1
1
1
2
1
1
2
2
1
1
2
1
1
2
1
1
2
2
1
Premium Baking
1
1
Desserts (Ambient)
2
1
1
2
2
1
2
Starches
2
1
Peanut Butter
2
1
1
1
1
Foodservice
1
1
2
1
1
2
2
1
1
1
2
2
1
1
1
2
Corn Oil
1
1
2
1
1
2
2
1
1
1
1
2
1
Mayonnaise
1
1
2
1
1
1
2
1
1
1
1
2
1
1
1
2
2
1
2
2
Pasta/Pasta Dishes
Potato Products
2
2
Pourable Dressings
Europe
Austria
Belgium
Bulgaria
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Netherlands
Norway
Poland
Portugal
Romania
Russia
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
United Kingdom
Sauces*
North America, Caribbean

Canada
Dominican Republic
United States
Soups*
1 Leader in Market Share

2 Second in Market Share
Present in the Market
Meal Kits*
Market Positions of Selected Bestfoods Products, by Country, 1999
Bouillons
exhibit 10
The McGrawHill
Companies, 2002
Case
1
1
1
1
1
1
2
1
1
2
2
1
2
1
1
1
1
1
1
2
1
1
1
2
1
(continued)
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Asia
China
Hong Kong
India
Indonesia
Japan
Malaysia
Pakistan
Philippines
Singapore
Sri Lanka
Taiwan
Thailand
Vietnam
1
1
1
1
1
1
1
2
1
1
2
2
2
1
2
1
2
1
1
1
2
1
1
1
2
2
1
2
2
1
1
2
1
1
1
1
1
1
1
1
1
2
2
1
2
1
2
2
2
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
Premium Baking
1
1
1
1
1
1
1
2
2
1
2
1
1
1
1
1
1
1
1
2
1
1
1
1
1
1
Desserts (Ambient)
1
1
Starches
Peanut Butter
Foodservice
Mayonnaise
Corn Oil
2
2
1
2
2
1
Pourable Dressings
2
2
Pasta/Pasta Dishes
Latin America
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Ecuador
El Salvador
Guatemala
Honduras
Mexico
Panama
Paraguay
Peru
Uruguay
Venezuela
Sauces*
Soups*
1 Leader in Market Share

2 Second in Market Share
Present in the Market
Potato Products
(concluded)
Meal Kits*
exhibit 10
The McGrawHill
Companies, 2002
Case
Bouillons
C-496

& Bestfoods
*Dehydrated products only.

Bestfoods foodservice (catering) products hold leading share positions in many of the categories in which they compete.
Source: Company annual report, 1999.
UNILEVER IN 2001
The companys 2000 annual report characterized Unilever as a truly multi-local,
multinational company dedicated to meeting the everyday needs of people everywhere. Unilever management was generally pleased with first-year results of the
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companys five-year Path to Growth initiative. Management believed its recent acquisitions had greatly strengthened the companys competitive position, giving it a
world-beating brand portfolio and unrivaled geographic coverage (see Exhibit 11).
Management also believed the company had built a solid platform for rapid growth in
the food-service segment.
In 2000 Unilever divested its positions in baked goods, selling its European baking business to a Dutch food products company in July 2000 for 700 million in cash
and then, as noted earlier, finding a buyer for the Bestfoods Baking Company several
months after completing the Bestfoods acquisition.
In January 2001, Unilever sold its European dry soups and sauces businesses (including the Batchelors, Oxo, Royco, McDonnells, Bla Band, and Heisse Tasse brands)
to Campbell Soup for 1 billion; also included in the sale was the Lesieur brand of the
mayonnaise products sold in France. The brands sold to Campbells had combined
sales of 435 million in 2000; EBITDA of 87 million, EBIT of 78 million, assets of
100 million, and about 1,300 employees; overall sales of the products had grown at 1
percent annually over the last three years. Unilevers divestiture of these brands was
undertaken to alleviate market power concerns expressed by the European Commission and gain the commissions approval of Unilevers acquisition of Bestfoods.
Exhibits 12 and 13 present Unilevers most recent financial statements. By yearend 2000, Unilever had refinanced much of the short-term debt used to finance the
Bestfoods acquisition through various bond issues. Interest costs on the companys
debt were said to average less than 7 percent and were expected to decline through
2001. Exhibits 14 and 15 present comparisons of Unilevers performance in 2000 versus 1999, by business group and by geographic region of the world.
In the first quarter of 2001, Unilever reported revenue gains of 20 percent over the
first quarter of 2000 (partly due to the contributions of acquisitions made in 2000), total operating profit gains of 38 percent, and an operating profit margin of 12.4 percent.
Global sales growth of the companys leading brands was 4.3 percent on an annualized
basis, excluding acquisitions. Unlevers sales growth performance by geographic region was said to be in line with the Path to Growth strategy:
Region
Western Europe
North America
Africa, Middle East, Turkey
Asia and Pacific
Latin America
1st Quarter 2001

versus
1st Quarter 2000
Growth due to
Acquisitions
Made in 2000
Sales Growth
of Leading
Unilever Brands
12%
31
13
8
7
9%
Strong
8%
Not reported
Not reported
3%
2
8
9
10
C-497
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exhibit 11 Market Standing of Core Products and Brands in Unilevers

Portfolio, Year-end 2000
Market Standing at Year-End 2000
Product Category
North
America
Europe
Latin
America
Rest of
World
Global
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#2
#1
#1
#2
#2
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
Mayonnaise/salad dressings
Bouillons and hot sauces
Dry soups
Ice cream
Margarines and spreads
(excluding butter)
Tea (black)
Source: Unilever slide presentation posted at <www.unilever.com>, April 2001.
exhibit 12
2000
( million)
47,582
44,637
Unilevers Consolidated Statement of Profit and Loss, 2000 versus 1999

1999
( million)
40,977
40,977
2,945
Acquisitions
(44,280)
(36,674)
5,729
4,595
(1,992)
(269)
(435)
(23)
3,302
4,303
3,363
4,303
(61)
57
42
4,345
3,408
4,345
(49)
(4)
10
2,723
4,341
(1,403)
(1,369)
1,320
2,972
(215)
Group operating profit before exceptional items and

amortization of goodwill and intangibles
Exceptional items
Amortization of goodwill and intangibles
(201)
(40,769)
(39,066)
5,274
4,895
(1,834)
(400)
(287)
(24)
4,584
Continuing operations
3,096
4,584
(56)
52
45
Total operating profit
Add: Share of operating profit of joint ventures
3,092
4,629
3,137
4,629
(45)
Other income from fixed investments

Interest
(3)
(582)
Profit on ordinary activities before taxation

Taxation on profit on ordinary activities
Profit on ordinary activities after taxation
Minority interests
2,771
Net profit
675
1,761
Attributable to: NV
430
1,010
(1,265)
43,650
43,650
3,040
1,105
(1,458)
43,809
41,098
Group operating profit
Acquisitions
(14)
1999
($ million)
2,711
Operating costs
Acquisitions
3,359
(632)
Group revenues
2000
($ million)
PLC
Dividends
2,507
4,624
(1,292)
(1,458)
1,215
3,166
(198)
(214)
1,017
2,952
621
1,876
396
(1,343)
1,076
(1,348)
(44)
(20)
(41)
(22)
(1,414)
(1,245)
Dividends on ordinary capital
(1,302)
(1,326)
1,506
Result for the year retained
(326)
(353)
Preference dividends
10
(15)
Source: Unilevers annual review, 2000.
1,604
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C-499
exhibit 13 Unilevers Consolidated Balance Sheet and Cash Flow Statement, 19992000
(at December 31)
Balance Sheet at 31 December
2000
( million)
1999
( million)
2000
($ million)
1999
($ million)
37,463
26,467
9,606
643
Fixed assets
Goodwill and intangible assets
34,852
24,622
9,650
646
10,996
8,963
Other fixed assets
10,230
9,004
5,421
5,124
Stocks
5,043
5,147
7,254
5,742
Debtors due within one year
6,749
5,768
2,563
1,943
Debtors due after more than one year
2,384
1,952
Acquired business held for resale
1,550
Current assets
1,666
3,273
5,473
20,177
18,282
(16,675)
(2,936)
(11,689)
(9,198)
(8,187)
6,148
29,276
15,754
13,066
1,853
1,019
979
6,404
4,582
618
579
Cash and current investments
3,045
5,498
18,771
18,365
Borrowings
(15,513)
(2,949)
Trade and other creditors
(10,874)
(9,241)
Creditors due within one year
Net current assets
(7,616)
6,175
Total assets less current liabilities
27,236
15,825
Creditors due after more than one year

Borrowings
12,155
1,862
Trade and other creditors

Provisions for liabilities and charges
Minority interests
948
982
5,958
4,603
575
581
8,169
7,761
Capital and reserves
7,600
7,797
6,300
6,122
Attributable to: NV
5,861
6,150
1,869
1,639
1,739
1,647
29,276
15,754
27,236
15,825
2000
($ million)
1999
($ million)
PLC
Total capital employed
Cash Flow Statement for the Year Ended 31 December
2000
( million)
1999
( million)
6,738*
38
(798)
(1,734)
(1,061)
(27,373)
(1,365)
5,654
28
(156)
(1,443)
(1,501)
(362)
(1,266)
(6,093)
Cash flow from operating activities

Dividends from joint ventures
Returns on investments and servicing of finance
Taxation
Capital expenditure and financial investment
Acquisitions and disposals
Dividends paid on ordinary share capital
Special dividend
6,203
35
(735)
(1,596)
(977)
(24,142)
(1,257)
6,023
29
(167)
(1,538)
(1,599)
(388)
(1,348)
(6,491)
(25,555)
(5,139)
(22,469)
(5,479)
2,464
22,902
5,675
(146)
Cash flow before management of liquid

resources and financing
Management of liquid resources
Financing
2,268
21,085
6,047
(156)
(189)
(27,152)
390
(5,094)
Increase/(decrease) in cash in the period

(Decrease)/increase in net funds in the period
884
(25,310)
412
(6,101)
*Includes payments of 550 million to settle share options and similar obligations in Bestfoods consequent to the change of control.
Source: Unilevers annual review, 2000.
C-500
2.7
3.0
2.6
2.7
1.5
1.5
*BEIA Before exceptional items and amortization of goodwill and intangibles.

Calculated using unrounded numbers for revenues and operating profits.
Source: Unilever annual review, 2000.
Operating profit BEIA*

Food Group
Home and Personal
Care Group
1.7
22.8
20.8
1.6
23.9
22.3
2000
(at current 2000
exchange rates)
2.4
2.0
2.4
1.8
19.8
20.3
1999
(at current 1999
exchange rates)
11%
26%
(38)%
(8)%
5%
9%
Percent change
(at constant 1999
exchange rates)
2.7
2.5
1.4
1.6
21.0
22.0
2000
(at current 2000
exchange rates)
2.6
2.2
2.5
1.9
21.1
21.7
1999
(at current 1999
exchange rates)
U.S. Dollars
& Bestfoods
Operating profit
Food Group
Home and Personal
Care Group
Revenues
Food Group
Home and Personal
Care Group
2000
(at constant 1999
exchange rates)
Euros
exhibit 14 Summary of Unilevers Performance, 2000 versus 1999, by Group (in billions of Euros and Dollars)
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Case
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1.7
0.1
0.2
0.7
0.3
2.4
1.3
0.3
0.8
0.5
Operating profit
Europe
North America
Africa & Middle East
Asia & Pacific
Latin America
Operating profit BEIA*

Europe
North America
Asia & Pacific
Latin America
2.3
1.0
0.3
0.7
0.4
2.2
0.8
0.3
0.6
0.4
18.8
8.8
2.3
6.7
4.3
1999
(at current 1999
exchange rates)
6%
30%
9%
23%
24%
(20)%
(83)%
(10)%
11%
(21)%
2%
13%
3%
7%
14%
Percent change
(at constant 1999
exchange rates)
2.3
1.4
0.3
0.8
0.6
1.6
0.2
0.2
0.7
0.3
18.2
10.7
2.3
7.4
5.2
2000
(at current 2000
exchange rates)
2.4
1.0
0.3
0.7
0.5
2.3
0.9
0.3
0.7
0.4
20.0
9.4
2.4
7.2
4.6
1999
(at current 1999
exchange rates)
Case
2.5
1.5
0.3
0.9
0.6
1.8
0.2
0.2
0.8
0.3
19.8
11.6
2.4
8.0
5.7
2000
(at current 2000
exchange rates)
U.S. Dollars

& Bestfoods
*BEIA Before exceptional items and amortization of goodwill and intangibles.

Calculated using unrounded numbers for revenues and operating profits.
Source: Unilever annual review, 2000.
19.2
10.0
2.4
7.2
5.0
Revenues
Europe
North America
Asia & Pacific
Latin America
2000
(at constant 1999
exchange rates)
Euros
exhibit 15 Summary of Unilevers Performance, 2000 versus 1999, by Geographic Area

(in billions of Euros and Dollars)
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ThompsonStrickland:

22. Unilevers Acquisitions

Copyright 2001 by Arthur A. Thompson.

22. Unilevers Acquisitions

Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

countries and whose major brands included Hellmanns mayonnaise, Skippy

22. Unilevers Acquisitions

Cases in Strategic Management

Searching for Focus and Identity

Organization and Management

Quoted in The Financial Times, February 23, 2000, p. 27.

22. Unilevers Acquisitions

Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

exhibit 1 Unilevers Business and Product Line Portfolio in Early 2000

I Cant Believe Its Not Butter, Country Crock,

The world leader in margarine and related

Birds Eye frozen foods (sold in U.K.), Iglo

Ice cream and

Breyers, Magnum, Solero, Walts, Langnese,

Unilever had ice cream sales in more than

Lipton, Lipton Ice Tea and Lipton Brisk

Lipton was the worlds most popular tea

Rag and Five Brothers pasta and pizza

Rag was Unilevers biggest selling culinary

Bread and confectionery mixes, baking

Had operations across 13 European countries,

22. Unilevers Acquisitions

Cases in Strategic Management

Calvin Klein, Chlo, Cerruti, Valentino,

Unilevers fragrance brands represented

Rexona/Sure, Axe/Lynx, Dove, Degree, Brut,

Rexona/Sure was the worlds number one

ThermaSilk, Sunsilk, Mods Hair (Japan),

Oral care and

Aim, Pepsodent, Mentadent, and Close-up

Soaps, lotions, and

Dove, Lux, Degree, Caress, Lever 2000,

Dove was the worlds number one brand

Wisk, Oxo, Omo, Surf, Ala, Persil, All, and Skip

Snuggle was the number two brand of fabric

Domestos surface cleaners, Cif household

Domestos was marketed in 43 countries, and

Unipath pregnancy tests

Diversey/Lever commercial cleaning products

These products were sold to institutional,

Source: Compiled by the case researcher from a variety of company sources.

Longtime company analysts regarded Unilever management as a slow-moving,

22. Unilevers Acquisitions

Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

exhibit 2 Summary of Unilevers Performance, 19952000 (dollars

22. Unilevers Acquisitions

Cases in Strategic Management

$19 billion in cash,

$12.4 billion in cash

General Mills acquired the

Philip Morris (the parent of Kraft

Kelloggs acquired Keebler

ConAgra acquired International

PepsiCo acquired Quaker Oats

Cadbury Schweppes acquired

Cadbury Schweppes brands: Schweppes and

Snapple brands: Snapple ready-to-drink teas