Unilever - Porter's 5 Forces Analysis Porters 5 Forces Model Being a global company, Unilever has very strong competition

not only from other strong multinational companies like P&G, Kraft and Nestle but also from other regional retailers. Porters 5 forces model is one of the most recognized frameworks for the analysis of competetive environment of an organisation. Porters five forces model which determine the competitive intensity and therefore attractiveness of the market where Unilever is operating . This model describes the attributes of an attractive industry and thus suggests when opportunities will be greater, and threats less, in these of industries. Attractiveness in this context refers to the overall industry profitability and also reflects upon the profitability of Unilever. An unattractive industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching pure competition, from the perspective of pure industrial economics theory. This model is based on five important elements of an organisation and uses both internal as well as external competences and threats faced by a business organisation. These five elements including; Buyer Power Unilevers buyers are scattered all around the world and they are in billions. In true sense they are not so powerful to pull prices down. But on the other hand it is easier for the customers to switch to a competitor. So Unilever has to be very precautious in deciding about prices and keep the customers satisfied. Competitive Rivalry In consumer products business Unilever has a large number of competitors and these competitors are in reality very strong. They range from small local corner shop retailer to big giants like P&G, Kraft and Nestle. These competitors almost provide equally attractive products and services and sometimes better. These competitors have the power

to attract and influence the customers by more attractive substitute, prices and marketing techniques. Threat of Substitution Continuous research and development in the consumer and household products has brought about a revolution in the consumer market and today customers like to try something new and better. This trend has reduced the customer loyalty and product lifecycle. Unilever is under continuous threat of substitute products and its competitors are already spending huge sums on R&D and new product development. Unilever has to be very adoptive and closer to its customers so as to get what exactly its customers want. Threat of New Entry As Unilever operates in different geographical markets so threat of new entrants varies in different markets. In well developed countries where big players like Unilever have a very strong hold and brand image, it is very hard for a new entrant to enter the market because of higher cost to set up a business. On the other hand in less developed markets, it is easier to enter as legal requirements and capital needed is not as much as in a developed market. Unilever has its presence almost in every market either through its subsidiaries, branches or franchises. But its brand image is a strong barrier in the way of new entrants. Suppliers Power Unilever has a policy of local buying and local manufacturing. Which provides itself an edge to brake power of its suppliers and make them weaker to negotiate at its own terms. Most of time Unilever has blanket agreements with its suppliers to provide for a certain period of time at a certain rate. This strategy help to prevent suppliers from switching to other competitors and charge higher rates. Also Unilever treat its suppliers fairly so as to create more loyalty among them like customers.

Conclusions and Recommendations Unilever is operating in a highly competitive and volatile environment and especially current economic crisis have made it difficult for many businesses to operate profitability. Legal requirements, technical changes and change in the habits of the customers have created problems for the businesses. Because of that companies like Unilever have to be updated and cotinuos R&D is solution to many of the problems. An attractive business is one with higher margins and low competitions. So the environment where Unilever operates is with higher level of competition and low level of profit margins. In this situation best strategy is to keep customers satisfied and loyal, continuos R&D, cost control and be responsive to the competitors.

PESTEL analysis - UNILEVER A scan of the external macro environment in which the firm operates can be expressed in terms of following factors: Political Economical Social Technological PESTEL analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. The headings of PESTEL are a framework for reviewing a situation, and can in addition to SWOT and Porters Five Forces models, be applied by companies to review a strategic directions, including marketing proposition. The use of PESTEL analysis can be seen effective for business and strategic planning, marketing planning, business and product development and research reports. PESTEL also ensures that companys performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985). PESTEL is useful when a company decides to enter its business operations into new markets and new countries. The use of PESTEL, in this case, helps to break free of

unconscious assumptions, and help to effectively adapt to the realities of the new environment.

Limitations of PEST analysis Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Economic factors affect the purchasing power of potential customers and the firms cost of capital. Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customers needs and size of potential markets. Technological factors can lower barriers to entry reduce minimum efficient production levels and influencing outsourcing decisions. It may be difficult to forecast future trends with an acceptable level of accuracy. In this regard, the firm may turn to scenario planning techniques to deal with high levels of uncertainty in important macro-environmental variables. http://www.quickmba.com/strategy/pest/ UNILEVER PESTEL Political and legal analysis Unilever is subject to local, regional and global rules, laws and regulations. These rules and regulations cover diverse areas such as product safety, product claims, trademarks, copyright, patents, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes. Important regulatory bodies in respect of business include the European Commission and the US Food and Drug Administration. Failure to comply with laws and regulations could leave Unilever open to civil and criminal legal challenge and may result in fines or imprisonment of personnel. Further, reputation could be significantly damaged by adverse publicity relating to such a breach of laws or regulations. During 2009-2010 almost 49% of Unilever revenue came from D&E markets including Brazil, India, Indonesia, Turkey, South Africa, China, Mexico and Russia. These markets typically proved more volatile than developed markets. Any government response to

reduce the impact such as fiscal stimulus, changes to taxation and measures to minimise unemployment have also affected Unilevers economic performance. In some regions Govt. has imposed heavy duties on imports and raw materials and it has a negative impact on production capacity. However, Unilever is quite good in managing relations with Governnments. source: http://www.hbs.edu/research/pdf/06061.pdf Unilever Financial Statement Economic analysis Unilever market environment is becoming highly competitive especially in the Western Europe. Macro economic environment is highly uncertain whcih has affected micro economic environment as well by creating a fear among ordinary consumers. Consumers would not want to buy expensive product or brands due to current economic tide. Competition in EU has grown so strong that Unilever is facing difficulties in places like France, Netherlands. Economic Decline in business during an economic downturn has resulted in customer and supplier default. Unilevers business is dependent on continuing consumer demand for its brands. Reduced consumer wealth driven by adverse economic conditions has resulted in consumers becoming unwilling or unable to purchase Unilever products, which has adversely affected cash flow, turnover, profits and profit margins. Adverse economic conditions have resulted in the impairment of some of intangible assets which are in the form of brand names. Adverse economic conditions have affected in two ways i.e. one or more countries within a region or extended globally. However, recession has increased the demand for some of the home care products. Unilever is operating in different market, which have reacted to recession in different ways. In D&E markets volume led growth has been improved upto 7% in the first quarter of 2010. Source: www.unilever.com Executives Directors Report Societal and Ecological Analysis Unilever has developed a strong corporate reputation over many years for its focus on social and environmental issues, including promoting sustainable development and

utilisation of renewable resources. It is very conscious about safety and health of its employees and accident rate decreased by 9% during 2009. Unilevers vision is to help people feel good, look good and get more out of life with brands and services that are good for them and good for others. It has successfully maintained high social and environmental standards by designing and producing products that are safe for consumers.

Unilever is working on so many social welfare projects like World food programme and safe drinking water. Unilever is using environment friendly materials and packing stuff.The Unilever brand logo now displayed on all products and advertising, increases its external exposure. Unilever has built its image as an environment friendly and socially responsible company. Unilever Financial Statements Operational Highlights http://www.unilever.com/sustainability/?WT.GNAV=Sustainability http://www.unilever.com/sustainability/?WT.GNAV=Sustainability Technological Analysis Unilever has been spending on IT to improve its business especially in the area of ebusiness so as to improve brands image and quality of its products. Unilever know that failure to provide sufficient funding to develop new products, lack of technical capability in the R&D function and quickly roll out the products may adversely impact its cash flow, turnover, profit and profit margins and affect reputation. High level of automation is one of the critical success factors of Unilever that differentiates then from their competitors and serves as a source of competitive advantage. Today, Unilever is trying to minimize cost through IT efficiencies at global level. In addition, Unilever Technology Venture works in collaboration with Unilever R&D group to help Unilever meet consumers needs. Area of concern is genomics, advanced bioscience, advanced materials science and nano technology.

Saturday, 16 July 2011 UNILEVER: AN ANALYSIS OF STRENGTHS, WEAKNESSES AND OPPORTUNITIES AND THREATS

Unilever SWOT Analysis Strengths Recognise as a Global Company Unilever is a well known global company with presence almost in more than 170 countries and it is registered at various stock exchanges around the globe which makes it a really global company with all the privileges of a global company like economies of scale, access to global resources and above all synergy of resources and operations.

Strong brand portfolio

Unilever has established a very strong relationship with retailers by offering them good

margins and incentives, which are very important for a company in the consumer brand market. This provides Unilever strength to reach the ultimate consumers. Source: Unilever financial statement Strong relationship with retailers Unilever has established a very strong relationship with retailers by offering them good margins and incentives, which are very important for a company in the consumer brand market. This provides Unilever strength to reach the ultimate consumers. Source: Unilever Directors report

Economies of scale Economies of scale occur when increased output leads to lower long run average costs. As a global company Unilever has reach to universal cheap resources. Because of its mass scale production it has ability to overcome the bargaining power of suppliers which results in lower cost of production. Source: http://www.economicshelp.org/blog/concepts/economics-of-scale/ Research and development Unilever is an innovative company and investing a huge sum on research and development of new products and brands. Because of this ability Unilever has created high entry barriers to the global consumer market. It has more than 61 innovation centres and 4000 academic researches. Source: Unilever financial statement

Excellent management and human element

Unilever has a pool of very skilled managerial capabilities in the form of its human resource capital from around the world in each geographic region. Its top management belongs to 21 different countries. This also helps Unilever to understand and manage local needs of customers, employees and stakeholder Source:http://www.unilever.com/images/ir_Unilever_factsheet_2010_tcm13-70889.pdf. Merger and acquisitions Unilever has a long history of mergers and acquisitions. This has enabled Unilever to break entry barriers into some very competitive markets and knock out strong competitors. This ability of Unilever has made it a local multinational company. Unilever has more than 44 companies in the Unilever group, 2 joint ventures and one UK associate. Other than that Unilever has its operation and agency relations in a huge number of countries. At present Unilever has more than 350 production facilities. Source: Directors Report http://www.unilever.com/investorrelations/understanding_unilever/factsheet/index.aspx

Weaknesses No direct connecting with customers Because of nature of business, Unilever has no direct connection to its ultimate consumers. It has to rely on its wholesalers and retailers. In western counties retails giants i.e. Tesco, Asda and Sainsbury are very strong and have the ability to dictate big multinational retail companies. Source: http://www.unilever.co.uk/sustainability/people/customers/ Inefficient management of brands Unilever has almost 400 different brands which is very difficult to manage to reap ultimate benefit. This huge portfolio of brands has created inefficiency on part of Unilever to differentiate between stars, cash cows and dog brands according to

Mandelows matrix. Top 25 brands of Unilever account for 73% of global turnover, which means rest of 375 brands account for only 27%. Source: Unilevers financial statements

Reduced spending for R & D Unilever is trying to improve its cash flow by cutting expenditure on R&D. During 2008 R&D spending were 927m which were reduced to 891m in 2009 and similar trend during 2010. This will lead to lack of innovations and introduction of new products Source: Unilevers financial statements Fall in revenues Decrease in revenue has revealed weak areas and put a psychological pressure on its management to make short term decisions to cope. This is oblivious from the strategy of maintaining short term cash flow by reducing spending on R&D and investment in long term assets and projects. Decrease in revenue has directly affected profit margins and market value of shares. Source: Unilevers financial statements

Opportunities Economic Crisis Where current economic crisis have made small companies with liquidity problems to find way for exit, there it has created opportunities for Unilever to acquire these demising companies at a very cheap price and enter into new markets. Source: (http://www.darkreading.com/security/management/showArticle.jhtml? articleID=212002170)

10

 Increasing need for healthy products Consumers are more aware today and prefer healthy products, so it is a good opportunity for Unilever to introduce healthy and safe products under its brand name to increase its market share and knock out its competitors. Developing markets More than 50% of Unilevers market share is from developing and emerging countries where market is less saturated and less competitive. Growth rate is high in these markets, so Unilever can invest in these markets to increase its market share. Source: http://www.unilever.com/mediacentre/pressreleases/2002/trade.aspx

Personal Care segment Unilevers personal care segment is fastest growing business and a key to achieving sustainable profitable growth. In 2010 Unilever reported an increase in personal care sales by 4%. The personal care segment should be a priority area for creation of future sales growth and sustaining profits from increasing raw material costs. Source: Unilever Directors report

Threats Strong Competition Unilever is not only a big multinational company in the global market. It has very strong competitors like P&G, Nestle and Kraft. These competitors always try to give tough time to Unilever and try to create high entry barriers to new and emerging markets. In

11

developing markets like India and Spain, small low cost retailers have a big market share and competition for Unilever. Source: Unilever Directors report Increasing store brands Big retail store like Tesco, ASDA, and Sainsbury has introduced a plenty of their own cheap brands which have led customers to switch for cheaper products. Source: Customers Interviews

Tougher Business Climate Overall business climate is tougher today because of economic crisis, tough Government regulations and competitive environment. It has led the companies to focus more their liquidity instead of profitability. Source: Unilever Directors report

Complex Organisational Structure Unilever has more than 42 group companies, Joint ventures and associates. It has hundreds of agency relationships. It has more than 300 production facilities are across the globe. All this has made Unilever structure very complex. A wrong corporate strategy can be a single point of failure of business.

12

Strong growth in 2011 despite difficult markets CEO shares his thoughts on company performance and business prospects for 2012 Q4 & full-year 2011 results highlights - PDF (75KB)

Unilevers fourth quarter and full-year results for 2011 reflect a robust performance despite the continuing tough economic environment. The company grew ahead of its markets, gained share overall and maintained a good balance of price and volume growth.

Turnover was 11.6 billion in the fourth quarter and 46.5 billion for the full-year Underlying sales growth* was 6.6% in the fourth quarter and 6.5% for the fullyear Underlying volume growth was 0.1% in the fourth quarter and 1.6% for the fullyear

Underlying operating margin was down by 10 basis points** (bps) for the full-year with a reduction in overheads offsetting much of the pressure on gross margins from higher commodity costs. Core earnings per share were up 4% at 1.41 at year-end with a free cash flow of 3.1 billion. Advertising and promotions spend (A&P) was up 150 million to 6.2 billion. Commenting on the companys performance, CEO Paul Polman said: In 2011 we have made significant progress in the transformation of Unilever to a sustainable growth

13

company despite difficult markets and an unusual number of significant external challenges. Our overall performance was driven by our growth in emerging markets and the Home Care and Personal Care categories. We invested heavily in our brands and exit the year with positive momentum. In Foods, whilst price increases have impacted volumes, we have grown in line with our markets and gained share in many of our key businesses. Click on the video above to view Paul Polmans analysis of the results. Regions Asia Africa CEE: The region continued to grow ahead of the markets in the fourth quarter and achieved positive volume growth despite higher prices, challenging macroeconomic conditions in many countries and sustained high levels of competitive activity. We saw strong double digit-growth in South Africa, Indonesia and Vietnam with continuing robust growth from India, Turkey and China. Japan continued to decline after the earthquake in the first half. Central & Eastern Europe growth, whilst better than the start of the year, remains muted. The Americas: North America delivered 2.1% underlying sales growth in 2011. This reflects both a good performance from Personal Care and the pricing action taken to recover input cost increases, particularly in spreads, in-home ice cream and bar soaps which had an adverse impact on volumes. Latin America grew 10.8% in 2011 with strong growth from Argentina and Mexico. Whilst growth in Brazil was lower, we saw an improvement in the second half after completing the trade stocks reduction which impacted the first half. Western Europe: Despite the depressed markets we gained share and continued to invest in our brands. Our six largest markets all delivered positive sales growth in the fourth quarter with notably good performances from France and Italy. Volumes were negatively impacted by the action to increase prices, particularly in spreads. In conclusion Paul said: Our overriding priority is to manage our brands for the long term health of the business whilst delivering profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow.

14

27/01/2012 Partnership with five global organisations to deliver sustainable change worldwide launched today at the World Economic Forum in Davos. London/Rotterdam/Davos 27/01/2012: Unilever today announced the launch of The Unilever Foundation, dedicated to improving the quality of life through the provision of hygiene, sanitation, access to clean drinking water, basic nutrition, and enhancing selfesteem. To help achieve the Foundations mission, Unilever has formed partnerships with five leading global organizations that are committed to creating sustainable change worldwide: Oxfam, PSI, Save the Children, UNICEF and the World Food Programme. The Unilever Foundation is a key action that Unilever is taking to help achieve its goal of helping more than one billion people improve their health and well-being, and in turn, create a sustainable future. We live in a rapidly changing world. One where populations are growing, water is becoming increasingly scarce, and where food security is a growing issue. Unilever is committed to addressing the unmet social needs that our business can play a unique role in helping to solve. This is especially true in developing and emerging markets where we have deep roots, said Keith Weed, Chief Marketing & Communications Officer at Unilever. We aim to double the size of our business while reducing our environmental impact and deliver increased social value. Together with our partners, we will deliver life-saving solutions as we work toward achieving these ambitious goals, he added. The challenges of the 21st century are increasingly complex:

15

Over 1 billion people do not have access to safe drinking water. More than 3.5 million children under 5 die annually from diarrhoea and acute respiratory infections. One child dies every four seconds from preventable and treatable diseases. 2.6 billion people lack access to improved sanitation. An estimated 925 million people suffer from chronic hunger.

Two billion times a day, somebody, somewhere, uses a Unilever brand. Our global reach and scale, coupled with a deep understanding of what triggers consumer behaviours that can lead to a sustainable future, uniquely enable us to drive long-term scalable and systemic change, added Weed. The Unilever Foundation will be working with its Global partners on a number of lifesaving initiatives:

The Unilever Foundations partnership with Oxfam will improve lives around the world through programmes designed to empower individuals and deliver good nutrition and clean, safe drinking water. According to Barbara Stocking, Oxfam Chief Executive, Unilever and Oxfam have been working together across the world for quite a number of years so we are pleased to be working with Unilever with the new Foundation as it is set up. The first way that we are going to work together is in the UK, providing food parcels to the very poorest people and helping them move from surviving to thriving. We are looking forward to extending that worldwide, focusing on two pillars core to Oxfams work on tackling poverty and inequality the rights of women and access to clean drinking water.

In supporting PSI, the Unilever Foundation is making a tangible contribution to improving the health of children and families through delivering behavioural change interventions focused on hand washing, clean drinking water and sanitation. "The launch of the Unilever Foundation represents the best of what is possible in Davos," said Karl Hofmann, President and CEO of PSI. "By pooling ideas and resources, private companies and health organizations can improve the health of millions of children and families worldwide. PSI is excited to be

16

working with Unilever, a company that recognizes - and values - the economic impact of good health."

The Unilever Foundation is working with Save the Children to save and improve the lives of children around the world. This will involve improving access to health workers and life-saving vaccines, and ensuring more children and mothers are reached with high-impact health and nutrition programmes. The partnership will also provide a platform to catalyse a global movement and generate the public and political will for a global breakthrough on child survival. Jasmine Whitbread, Chief Executive of Save the Children International, said "Save the Children is proud to be selected as a partner for the Unilever Foundation. This partnership will help us to deliver transformational change to millions of children's lives around the world through our EVERY ONE campaign. Each year 7.6 million children die needlessly of preventable illnesses. The support from Unilever will bring us a step closer to ensuring that a health worker is within reach of every child, life-saving vaccines are available for all, and children have enough food to grow up healthy. Combining our global reach and joint mbition we can give children the chance to fulfil their potential."

The Unilever Foundation and UNICEF are partnering to improve sanitation in developing countries through UNICEFs Community Approaches to Total Sanitation (CATS) initiative, a behaviour change program that promotes good hygiene practices, helps create demand for access to toilets, and raises awareness of the sanitation crisis. By investing with communities in sanitation, this partnership is helping us break one of the last taboos in public health open defecation and demonstrating real leadership for the private sector, said Anthony Lake, UNICEFs Executive Director. Improved sanitation could prevent the deaths of over one million children each year so these investments have enormous potential for the future health and strength of their societies.

The Unilever Foundation is also partnering with the World Food Programme (WFP) in Project Laser Beam, a public-private partnership that aims to create a scalable and sustainable model to improve nutrition, health, and livelihoods in Bangladesh and Indonesia. With millions of children around the world suffering from malnutrition, there has never been a better time to take action on this truly

17

solvable problem, said WFP Executive Director Josette Sheeran. Project Laser Beam is investing in the next generation by ensuring that our children grow up healthy and strong. The knowledge and expertise of partners like the Unilever Foundation help make this goal a reality.

Additionally, the Unilever Foundation is also working with other organizations worldwide by providing a combination of direct funding, expertise, products and employee support that help to help address country-specific needs primarily aligned with the Foundations mission. ENDS About the Unilever Foundation Partners Oxfam Oxfam is a global humanitarian, development and campaigning organisation working with others to overcome poverty and suffering. Since its Oxford-based beginnings in 1942, it has grown into a worldwide force. Oxfam is now working in nearly 60 countries on a diverse range of projects, from providing emergency water sources to supporting community health projects. Oxfam has one million supporters in the UK. For every 1 donated to its general funds, 83p is spent on emergency, development and campaigning work, 10p is spent on support and governance and 7p is invested to generate future income. Oxfam has more than 700 high street shops across the UK selling donated fashion, books, music, homewares and new ethical products. It is supported by a workforce of 22,000 volunteers. Oxfam also launched the UKs first online charity shop in 2007. Oxfam GB is affiliated to Oxfam International, a global confederation of 15 independent Oxfams which share the same purpose. Visit www.oxfam.org.uk PSI PSI is a global non-profit organization dedicated to improving the health of people in the developing world by focusing on serious challenges like a lack of family planning, HIV/AIDS, maternal health, and the greatest threats to children under five, including malaria, diarrhoea, pneumonia and malnutrition. Twitter: www.twitter.com/PSIHealthyLives; Blog: www.psi.org/HealthyLives

18

UNICEF UNICEF works in 190 countries and territories to help children survive and thrive, from early childhood through adolescence. The worlds largest provider of vaccines for developing countries, UNICEF supports child health and nutrition, good water and sanitation, quality basic education for all boys and girls, and the protection of children from violence, exploitation, and AIDS. UNICEF is funded entirely by the voluntary contributions of individuals, businesses, foundations and governments. For more information about UNICEF and its work visit: www.unicef.org Save the Children Save the Children works in more than 120 countries. We save children's lives. We fight for their rights. We help them fulfill their potential. For more information visit: www.savethechildren.org.uk World Food Programme WFP is the world's largest humanitarian agency fighting malnutrition and hunger worldwide. Each year, on average WFP feeds more than 90 million people in more than 70 countries. WFP has prioritized reaching children in the first 1000 days, when their brains and bodies are subject to permanent stunting due to a lack of micronutrients. WFP procures 80 percent of food and nutrition supplies it purchases from the developing world. WFP now provides RSS feeds to help journalists keep up with the latest press releases, videos and photos as they are published on WFP.org. For more details see www.wfp.org/rss

19

Analysis: Unilever shakes up strategy in CSR goals Josh Brooks, 1 December 2010 1 Comment Consumer goods giant wants to double in size in ten years while cutting its carbon footprint and helping one billion people lead healthier lives. The strategy has radical implications for packaging, reports Josh Brooks Share

The consumer goods industry faces many conundrums. But as environmental concerns become more embedded in everyday life, one has become the biggest question facing FMCG: how to grow a business while remaining sustainable. Many have attempted to find an answer. Read the CSR report of most FMCG companies and targets pour off the pages in areas as diverse as carbon emissions, packaging weight and water usage. Last month, Unilever set out its own Sustainable Living Plan, perhaps the most wideranging CSR programme unveiled by a consumer goods group. The Anglo-Dutch company, whose food, home and personal care brands include Lynx, Persil, Flora, Hellmans and Knorr has some very big ambitions.

20

By 2020, Unilever wants to help one billion people improve their health; source all its agricultural raw materials from sustainable sources; and halve the total environmental footprint of its products. As if that wasnt enough, it aims to double in size. To put that in context, the groups annual turnover for the last three years has been around 40bn, or 34bn. Right thing to do How reaching the targets laid out in the Sustainable Living Plan will actually happen remains to be seen. Doubling the size of the business will, perhaps, be the easy part; Unilever is already in acquisition mode, with the home care arm of Sara Lee the latest bolt-on. But for the 50 or so specific CSR goals, Unilever chief executive Paul Polman is quite clear: he doesnt have the answers. Speaking at the plans launch event, he said: There might be targets that we miss. But if we do this we will be in a better place than we were before, he said. We see no conflict between business growth and sustainable consumption. And we believe it is the right thing to do for the company, for our customers and for the planet. So what does all this mean for packaging? The good news is that Unilever has taken a very broad view of what CSR means in economic, social and environmental terms. The targets cover issues as diverse as promoting health and hygiene in areas where diarrhoea is a major killer; improving diets through better nutrition; and cutting water usage through a products lifecycle, from sourcing and production to the products use in homes. But that doesnt mean the packaging supply chain is off the hook. Every one of those pillars is equally important, says Louis Lindenberg, global design and sustainability director at Unilever. They are built into every category, brand and region right across the business. Unilevers plan sets out a range of targets for reducing packaging waste (see box); the headline measure is to cut the weight of its packaging by a third by 2020. They are tough

21

goals that have been in development by the companys packaging team since pilots on sustainability metrics began in 2008.

Radical shift Now the targets are out in the open, Lindenberg says that the company will be looking to the packaging industry to come up with the technologies that will help it reach them. We need our suppliers to work with us in developing new materials, new formats stronger, lighter, with better barrier properties and with as much recycled content as possible, he says. Driving Unilevers side of the bargain is a newly-created team of materials experts who will radically change the groups strategy when it comes to packaging innovation. Traditionally, packaging development has been pushed by the needs of individual brands. But under the new structure, Lindenberg explains, the team will monitor developments in packaging technology and project where in the companys multitude of product categories and markets and, crucially, when the new developments could be deployed. Its a fundamental shift in our packaging strategy, says Lindenberg. We used to work on a project basis but this is all about getting the best pack format types wherever they are needed in the company. Yet with such a huge range of products and geographical markets, Lindenberg readily admits there is no one-size-fits-all answer to the problem of reducing packaging weight or waste. Some changes might be a question of what is or isnt acceptable to the consumer such as switching glass to plastic on sauces or mayonnaise, for example.

22

There are also issues around the different recycling infrastructures in different arts of the world. In Europe, for instance, flexible plastics are recovered, at least to an extent. But in most of the rest of the world they go straight to landfill. Much of the effort in CSR is often in communication. Yet while Unilever has made a major PR play with its Sustainable Living Plan, it appears unlikely to follow the lead of brands such as Kenco or Stella Artois and start pitching packaging as a key plank in its advertising. Lindenberg says: Our messages will be few and far between. The biggest area [for consumers] is end of life and we will work with retailers and local councils to increase recycling rates weve already done a lot of work in that area on aerosols in the UK. So no greenwash, a measured attitude towards packagings sustainability role and a collaborative approach to innovation: it sounds like a suppliers dream. The industry will have to wait to see how Unilevers grand plan pans out. Just dont ask Paul Polman he doesnt know. Packaging Goals Unilevers Sustainable Living Plan sets out targets to: Cut the weight of packaging by a third by 2020 Increase the use of refills Work with partners in NGOs, government and industry to increase recycling in its 14 biggest markets by 5% by 2015 and 15% by 2020 Reduce total waste sent for disposal to below 2008 levels by 2020, despite planned higher volumes Develop and implement a sustainable business model for handling the sachet waste stream by 2015 Eliminate PVC from all packaging by 2012 where alternatives exist Build new factories that produce only half the waste of existing factories

Barry Callebaut and Unilever sign long-term partnership agreement

23

London/Rotterdam/Zurich, 23rd January 2012 Barry Callebaut AG, the worlds leading manufacturer of high-quality cocoa and chocolate products and Unilever, one of the worlds foremost consumer goods companies and global market leader in ice cream, announced today the signing of a new long-term global partnership agreement. Under the terms of the agreement, Barry Callebaut will become Unilevers strategic global supplier and innovation partner of choice for its cocoa and chocolate needs. This new global supply agreement builds on the existing long-standing working relationship and will nearly double Barry Callebauts current volumes with Unilever.

Ultimately Barry Callebaut will provide 70% of Unilevers global cocoa and chocolate products. This will be achieved under a wide-ranging joint business development plan involving close co-operation across the areas of innovation, sustainable sourcing, capacity expansion and value improvement. Kevin Havelock, President of Unilevers Refreshment Category, said: Our Ice Cream category has a significant role to play in Unilevers sustainable growth model to deliver our ambition of doubling the size of our business whilst reducing our environmental impact. Our leadership position has been built on great taste, innovation and increasingly sustainable ingredients. We need partners like Barry Callebaut to help us extend this position and achieve our overall aim. As a result of the agreement, Barry Callebaut will invest approximately CHF 22 million (EUR 18 million / USD 24 million) in its worldwide factory network in order to prepare the capacity required to fulfill the long-term partnership agreement. The additional volumes have a ramp-up period of 12 months, starting immediately. Juergen Steinemann, CEO of Barry Callebaut, said: We are honored that we can announce this long-term partnership with Unilever today and be part of their Partner to Win strategy. This agreement is based on a successful long-standing collaboration between our two companies. Once again, it confirms that by living our four strategic pillars we can accomplish and deliver on the requirements of our customers. Barry Callebaut has already been an active partner in developing one of Unilevers most successful ice cream brands, Magnum, including supporting the launch of this iconic brand across various regions in the last year.

24

Barry Callebaut has also been working closely with Unilever to meet its sustainable cocoa sourcing commitments. The parties agreed not to disclose any further terms of the agreement. With annual sales of about CHF 4.6 billion (EUR 3.6 billion/USD 5.0 billion) for fiscal year 2010/11, Zurich-based Barry Callebaut is the worlds leading manufacturer of highquality cocoa and chocolate from the cocoa bean to the finished chocolate product.

Barry Callebaut is present in 27 countries, operates around 40 production facilities and employs a diverse and dedicated workforce of about 6,000 people. Barry Callebaut serves the entire food industry focusing on industrial food manufacturers, artisans and professional users of chocolate (such as chocolatiers, pastry chefs or bakers), the latter with its two global brands Callebaut and Cacao Barry. Barry Callebaut is the global leader in cocoa and chocolate innovations and provides a comprehensive range of services in the fields of product development, processing, training and marketing. Cost leadership is another important reason why global as well as local food manufacturers work together with Barry Callebaut. Through its broad range of sustainability initiatives and research activities, the company works with farmers, farmer organizations and other partners to help ensure future supplies of cocoa and improve farmer livelihoods.

25