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New lever at Unilever

Created:

8 October 2008

Written by:

Alistair Blair

I have resisted the temptation to say something else about the financial crisis, but I am very depressed about it. We will all be a lot poorer in a year's time. One sector, however, will cope with it quite well, and that's personal care. After all, no one's going to stop washing their hair or cleaning their kitchens. There are two juggernauts in this sector: Unilever and Procter & Gamble (or P&G as it now seems to call itself). Both date back to the 19th century, and they have been well-matched sparring partners for decades.

Five years ago, P&G was modestly smaller than Unilever based on sales. But since a big upset in 2000 which displaced the previous boss, Durk Jager, his successor Alan Lafley hasn't put a foot wrong. P&G is now 35 per cent bigger in sales terms than Unilever and, as the tables show, that's not all it has going for it. (The tables compare P&G's June year-end with Unilever's December year-end, and therefore do not show P&G's continued advance in the year just reported.)

Such is the ebb and flow of business fortunes. Unilever and its shareholders are acutely aware that it is falling dangerously behind. That's why, 18 months ago, they took the unprecedented step of appointing an outsider as chairman. He is Michael Treschow, a Swede with a distinguished business career including several positions that involved slimming workforces - an issue at the top of Unilever's agenda. But one outsider wasn't enough. So, last month, Unilever appointed Paul Polman to become chief executive from January 2009. Although Mr Polman joins from Nestlé, where he was the chief financial officer, he spent the previous 26 years at P&G, latterly running its European operations.

Now there's a decision and a half. Like Treschow, Polman is the first outsider to be appointed to this senior Unilever position. Remember, this company goes back 120 years. Perhaps lacking a sense of irony, a retired Unilever director told the Financial Times last week: "… it's amazing… I can't imagine P&G taking on someone from Unilever."

Commentators reckon Unilever is too much like the civil service. It's got some good operations and some entrenched positions, but it lacks single-mindedness. By contrast, P&G is often characterised as a more military style company. Both have expanded via acquisition, but they bought differently. Unilever assembled a garageful of small acquisitions, along with some larger deals. It has become more focused in recent years but, at various points in living memory, it has made undistinguished ventures in to and out of food retailing, lino manufacture and office furniture. P&G has always made very strategic purchases that have been close to its existing businesses - none moreso than the acquisition in 2005 of Gillette, which was the landmark deal by which it overtook Unilever.

You can get an interesting insight into how the two companies view themselves by going to their investor websites and downloading the slides for the presentations they each made at the annual consumer sector conference, hosted by the late-lamented Lehman Brothers last month. P&G takes it as read that its audience knows it is in the brands business. The famous P&G portfolio of brand names barely gets a look-in. The presentation is relentlessly focused on aspects of running the company that feed into profit. The word "productivity" is used 22 times - applied to brands (getting rid of small ones), travel reduction, advertising and acquisitions.

By contrast, Unilever's presentation contains many slides about the successful parts of its business. It's the world's number one in deodorants. Its advertising is "brilliant". Its margarine brands in Holland are "more likely to grow". All in all, 22 of its brands are named and four get entire slides to themselves. The audience hears that the opportunity for growth in lesser-developed countries is very promising and that "Vitality underpins everything we do". And so on. Yawn. Tell me something I didn't know.

The important issue, accurately identified in the agenda, "The Journey to a new Unilever", has a couple of substantive slides, but says nothing about the yawning productivity gap against P&G which leaps out of the table below.

Mr Polman has a lot to do, and not only about that productivity gap.

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