Morgan Stanley Global Consumer Conference 2004 - Unilever
Morgan Stanley Global Consumer Conference 2004 - Unilever
Morgan Stanley Global Consumer Conference 2004 - Unilever
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Antony Burgmans<br />
Chairman <strong>Unilever</strong> N.V.<br />
3 November <strong>2004</strong><br />
0
Safe harbour statement<br />
This presentation may contain forward-looking statements,<br />
including ‘forward-looking statements’ within the meaning of the<br />
United States Private Securities Litigation Reform Act of 1995.<br />
These forward-looking statements are based upon current<br />
expectations and assumptions regarding anticipated<br />
developments and other factors affecting the Group. They are not<br />
historical facts, nor are they guarantees of future performance.<br />
Because these forward-looking statements involve risks and<br />
uncertainties, there are important factors that could cause actual<br />
results to differ materially from those expressed or implied by<br />
these forward-looking statements. Further details of potential risks<br />
and uncertainties affecting the Group are described in the Group’s<br />
filings with the London Stock Exchange, Euronext Amsterdam and<br />
the US Securities and Exchange Commission, including the<br />
Annual Report & Accounts on Form 20-F. These forward-looking<br />
statements speak only as of the date of this presentation.<br />
1
Mission Statement<br />
“<strong>Unilever</strong>’s mission is to add vitality to life.<br />
We meet the everyday needs for nutrition,<br />
hygiene and personal care with brands<br />
that help people feel good, look good and get<br />
more out of life.”<br />
Agenda for today:<br />
• Overview of <strong>Unilever</strong><br />
• Recent performance and actions being taken<br />
• Bring this to life by featuring North America - a good, practical<br />
illustration of:<br />
- long term strategic development<br />
- scale and portfolio reach<br />
- managing categories through brands<br />
with some specific category and brand examples.<br />
2
<strong>Global</strong> scale, category leadership<br />
Savoury & Dressings<br />
Spreads<br />
Weight management<br />
Tea<br />
Ice Cream<br />
Frozen Foods<br />
Laundry<br />
Household Care<br />
Daily Hair Care<br />
Skin<br />
Deodorants<br />
Oral Care<br />
Prestige Fragrances<br />
Western<br />
Europe<br />
Source: Euromonitor, <strong>Unilever</strong> estimates<br />
North<br />
America Other<br />
Regions World<br />
2003 Turnover €bn 16.9 9.9 16.1 42.9<br />
US$bn 19.1 11.1 18.2 48.4<br />
3<br />
Number 1<br />
Number 2<br />
Number 3<br />
or less<br />
Not<br />
present<br />
Unsurpassed geographic presence, including:<br />
• strong, long established presence in Developing & Emerging<br />
markets:<br />
- over a third of our total business<br />
• $ 11 billion business in North America<br />
By category and region:<br />
• leader in more than half of the markets in which we operate<br />
• number one or two in almost 80% of them<br />
In the Home and Personal Care categories our greatest strength is<br />
outside North America and Europe - about half of our HPC business is<br />
in the ‘developing world’.
Unique basket of strong, relevant brands<br />
4<br />
etc….<br />
Our category positions are built on a strong portfolio of brands:<br />
These are some examples of:<br />
• <strong>Global</strong> brands<br />
• Local jewels (some US ones shown at the bottom of the chart)<br />
We now have 12 brands with a turnover of over €1 bn, up from<br />
only 4 in 1999.<br />
The brands have been built over time with consistent support:<br />
<strong>Unilever</strong> is one of world’s largest advertisers.
<strong>2004</strong> performance<br />
� Outlook now for low single digit growth in EPS<br />
� Disappointing sales<br />
� Commitment to restore top line growth<br />
Actions being taken:<br />
� Stepping up market place aggression<br />
� Sustained innovation & activation behind<br />
focused portfolio of brands<br />
In September, lowered <strong>2004</strong> outlook for EPS beia growth to low<br />
single digits:<br />
• followed continuation of weak sales (ytd u.s.g. -0.6%) and<br />
pressure on some market positions<br />
• included increased investment behind brands from Q4 <strong>2004</strong><br />
<strong>Unilever</strong> fully committed to driving shareholder value<br />
• number 1 priority is re-igniting top line growth<br />
Action being taken:<br />
• adjusting price points where necessary<br />
• stepping up support behind key innovations<br />
• increasing media spend for a number of leading brands<br />
5
Improving competitiveness in Europe<br />
� Weak consumer confidence<br />
� Retail dynamics: discounters, traditional retailers<br />
� Share loss in some categories<br />
Actions being taken:<br />
� Pricing<br />
� Innovation<br />
� Activation<br />
Europe<br />
Market conditions difficult in a number of countries<br />
• <strong>Consumer</strong> confidence remains weak<br />
• Continued growth of ‘discount’ retail formats<br />
• Response of traditional retailers<br />
Increased emphasis on need for brands to offer good value<br />
Also, not helped by poor summer weather !<br />
Against this background - share loss in some categories.<br />
Action being taken:<br />
• already adjusted some price points in a number of countries<br />
• driving harder on innovation - e.g. cholesterol lowering technology<br />
-<br />
pro.activ extensions<br />
• stepping up brand activation - e.g. laundry ‘dirt is good’ campaign<br />
6
Taking the initiative in Asia<br />
Asia<br />
� India - robust defence of market positions<br />
� Japan - step up in innovation activity<br />
� Elsewhere - strong programme of innovation<br />
and activation<br />
Large and growing market, strong positions<br />
Step-up in activity from several competitors in laundry and hair care in<br />
a number of countries.<br />
Actions being taken:<br />
• In India:<br />
- price reductions already in place<br />
- launch of Rin ‘Advance’ laundry powder - superior whitening<br />
• In Japan:<br />
- Lux Super Rich: improved formulation, packaging,<br />
communication<br />
• Innovations targeting large anti-dandruff shampoo segment in India,<br />
China and South East Asia<br />
Confident that these and other initiatives will restore top-line<br />
momentum<br />
7
Robust defence in South Latin America Laundry<br />
1994-1996:<br />
• Competitor acquisitions<br />
1999:<br />
• Competitor attack - pricing, innovation, A&P, etc.<br />
Since 1999:<br />
• Unrivalled leadership maintained and secured across<br />
the sub-region<br />
• Initial reduction in profitability, since reversed<br />
An illustration of robust defence of a strong position<br />
Since 1999:<br />
� 700 bps + increase in operating margin<br />
� business today has double digit operating margins<br />
� capital efficiency improved by 690 bps<br />
A clear demonstration that this strategy creates long term value<br />
8
North America<br />
So now to a practical illustration - North America<br />
A strong business built over many years<br />
9
<strong>Unilever</strong> in North America 1993 - 2003<br />
US$ billions<br />
Turnover<br />
- Foods<br />
- Personal Care<br />
- Home Care<br />
Total Foods, P Care & H Care<br />
Professional Cleaning<br />
& Speciality Chemicals<br />
Total turnover<br />
Operating margin*<br />
* before exceptional items and amortisation of goodwill<br />
10<br />
1993 2003<br />
3.4<br />
2.5<br />
1.0<br />
6.9<br />
1.7<br />
8.6<br />
7.5%<br />
6.4<br />
3.3<br />
1.4<br />
11.1<br />
-<br />
11.1<br />
16.8%<br />
Foods and Home and Personal Care has grown from under $7<br />
billion to just over $11 billion.<br />
Today:<br />
• somewhat over half is in Foods<br />
• 30% is in Personal Care<br />
• a little under 15% is in Home Care<br />
Operating margins have more than doubled over this period to<br />
16.8% last year - slightly more than the <strong>Unilever</strong> average<br />
This has been achieved through strategic thrusts:<br />
• focus on categories and brands<br />
• strengthening the portfolio through acquisition<br />
• generating economies of scale<br />
• customer management as a competitive advantage
Focus on categories and brands -<br />
Portfolio strengthened by acquisitions<br />
1993 Breyers, Breyers,<br />
Klondike<br />
Leadership in Ice Cream<br />
1996 Helene Curtis<br />
Critical mass in Hair Care & Deo.<br />
2000 Slim.Fast<br />
Leadership in Weight Management<br />
2000 Ben & Jerry’s<br />
Adding Premium Ice Cream<br />
2000 Bestfoods<br />
Scale in Foods, leadership in Dressings, strong<br />
Foodsolutions<br />
Acquisitions targeted to strengthen <strong>Unilever</strong> categories or bring<br />
capabilities in fast growing adjacent categories<br />
Most recently and by far the largest is Bestfoods.<br />
Bestfoods transformed our Foods presence in North America and<br />
globally.<br />
With half year results reviewed Bestfoods progress and confirmed<br />
meeting targets set out:<br />
• Cost synergy > € 1 billion<br />
• Foods momentum growth rate up by over 100 bps<br />
• Cash earnings accretive in year 1<br />
• ROIC / WACC cross-over achieved in 4th full year (mid <strong>2004</strong>)<br />
• Bestfoods brands accretive to <strong>Unilever</strong> Foods growth<br />
• Debt paydown on plan<br />
Bestfoods brands have grown by 3-4% on average since 2001.<br />
11
Focus on categories and brands -<br />
Exit via disposals<br />
1997 Chemicals<br />
1998 Canned meats<br />
2001 Frozen Fish<br />
2001 Pregnancy testing<br />
2001 Prestige Cosmetics<br />
2002 Professional Cleaning<br />
2003 Mass fragrances<br />
2003 Oral Care<br />
2003 Dishwash<br />
Number of brands<br />
% of turnover in leading brands<br />
12<br />
2000 <strong>2004</strong><br />
113 59<br />
78% 97%<br />
Disposals have contributed to category and brand focus.<br />
With Path to Growth, since 2000, focus on selected brands.<br />
Number of brands down from over 100 to less than 60 in North<br />
America.<br />
97% of the portfolio now in leading brands - compared with 78% at<br />
the start.
Generating economies of scale<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03<br />
From several companies towards acting as a single unit:<br />
Van den Bergh<br />
Lipton<br />
Bestfoods<br />
Slim.Fast<br />
* Fixed assets + working capital % turnover<br />
Operating margin beia Assets* % sales<br />
Good Humor<br />
Breyers<br />
Ben & Jerry’s<br />
13<br />
Lever<br />
H. Curtis<br />
C. Ponds<br />
Operating margin more than doubled over the period<br />
Asset efficiency dramatically improved<br />
Supply chain improvement:<br />
• sourcing simplification<br />
• tactical outsourcing<br />
• global purchasing<br />
• distribution reconfigured with a major reduction in the number of<br />
warehouses<br />
• integrated systems<br />
…with improved customer service.<br />
Leveraging the scale of <strong>Unilever</strong> by integrating 10 companies into 3<br />
business units.<br />
• next stage now in progress - implementation of shared support<br />
services between Foods and HPC, while retaining separate<br />
marketing<br />
focus.<br />
Single face to the customer……..<br />
35<br />
33<br />
31<br />
29<br />
27<br />
25<br />
23<br />
21<br />
19<br />
17<br />
15
Customer management as a competitive<br />
advantage<br />
Source: AC Nielsen<br />
Unique store reach<br />
Common Agenda’s - Drive Profitable Growth<br />
Building competitive advantage<br />
• Shopper Insight Research across the entire store<br />
• Category Vision, Category Mgmt, & Customer Marketing<br />
capabilities<br />
• Advanced Promotion Simulation and Evaluation Models<br />
• Consumption based Supply Chain models driven by Customer<br />
POS<br />
• Proprietary Customer Strategic Planning process & systems that<br />
allows insight into future business conditions<br />
<strong>Unilever</strong> can leverage this with it’s unique store reach, e.g.:<br />
- category captains in 9 categories with Wal.Mart across Foods and<br />
HPC<br />
• “One <strong>Unilever</strong>” face to the customer across North America<br />
• <strong>Consumer</strong> events capitalize on brand portfolio across categories<br />
• <strong>Unilever</strong> dedicated retail teams for retail excellence and execution<br />
14
Mass Home and Personal Care - USA<br />
Skin Deodorants Hair Laundry<br />
# 1<br />
#2 # 2<br />
15<br />
# 2<br />
Example of how we manage categories through leading brands in<br />
Home and Personal Care in the US.<br />
‘Cornerstone’ brand in each category, supported by the other<br />
brands in the portfolio<br />
The cornerstone brand:<br />
• has the consumer ‘pulling power’ with the retailer<br />
• can generate economies of scale in production, R&D, distribution<br />
Enables the other brands to:<br />
• build on this by meeting specific consumer needs in the category<br />
• support the cornerstone brand bringing additional scale to the<br />
category<br />
In this way the brands combine to give leadership or #2 positions<br />
Brands can extend across categories, provided they remain true to<br />
the brand essence - what the brand stands for.
Deodorants - the effect<br />
%<br />
30<br />
28<br />
26<br />
24<br />
22<br />
20<br />
18<br />
16<br />
14<br />
12<br />
10<br />
* Year to Date<br />
'96 '97 '98 '99 '00 '01 '02 '03 '04*<br />
Source: AC Nielsen, 6 channel data<br />
Antiperspirants & Deodorants<br />
Illustration in Deodorants….<br />
Market share - Deodorants<br />
5 years ago Degree was our main brand in this category,<br />
supported by Suave.<br />
16<br />
Competitor 1<br />
<strong>Unilever</strong><br />
Competitor 2<br />
Competitor 3<br />
The introduction of Dove produced the first step change in ‘99 -<br />
‘00<br />
The introduction of Axe produced the next step-up, starting last<br />
year.
Deodorants - the effect<br />
Advertising<br />
17
Hair Care - Portfolio in change<br />
Supported by:<br />
Preeminent ‘value’ brand<br />
21 % share by volume - #1<br />
10% share by value<br />
Launched in 2003<br />
4% share by value<br />
Total <strong>Unilever</strong><br />
29% share by volume - #1<br />
18% share by value - # 2<br />
Market shares of Daily Hair Care. Source: AC Nielsen 6 channel data<br />
Different situation in Hair:<br />
Suave is ‘cornerstone brand’: in a value positioning.<br />
21% share by volume is almost twice the nearest brand<br />
Dove:<br />
• proved credentials for hair in Asia then in Europe, now<br />
strengthens category portfolio in N America<br />
• launched 2003 currently 4% share by value of daily hair care<br />
Supported by: Thermasilk, Finesse, Salon Selectives, Aquanet.<br />
2003/4 - a period of intense competitive activity<br />
2003 <strong>Unilever</strong> focus was on Dove launch. Some share loss in<br />
Suave and the other, supporting brands.<br />
<strong>2004</strong> continue to build Dove, renewed emphasis on Suave.<br />
Shares stable for last 6 months<br />
2005 & beyond - developing all segments with the full portfolio<br />
18
Foods - USA<br />
Spreads Tea Ice Cream Weight<br />
Mgmt<br />
# 1 # 1 # 1 # 1 # 1<br />
19<br />
Dressings<br />
Olive<br />
Oil<br />
# 1<br />
…and a strong Foodsolutions business<br />
Managing categories through brands - this time for Foods:<br />
Savoury<br />
Shows leadership in all categories except for Savoury where we<br />
are still #2<br />
Illustrates that:<br />
• for some categories, a single cornerstone brand can lead a<br />
category on it’s own: e.g. Lipton in tea, Bertolli in Olive Oil<br />
• in other categories it may be necessary to have a range of<br />
brands;<br />
e.g. Spreads.<br />
Strong business in the Foodservice channel:<br />
• branded in it’s own right with a reputation for excellence in<br />
providing solutions and technical support ‘back of house’<br />
• leverages the other brands (Hellmann’s, Lipton etc,) in the ‘front<br />
of<br />
house’.<br />
#2
Ice Cream -<br />
Adding Fun to Vitality<br />
US Ice Cream market is by far the largest in the world -<br />
consumption rate of over 20 litres per head.<br />
Total market grows at around 2% p.a. but within this, products<br />
which address ‘health & wellness’ are growing much faster<br />
Our range includes products which offer options for:<br />
• Low fat, including Frozen Yoghurt<br />
• No Sugar<br />
• Low carb<br />
• Organic<br />
• Lactose free<br />
Together these products are now over 20% of our Ice Cream<br />
portfolio<br />
In aggregate this part of our portfolio has grown by over 40% p.a.<br />
over the past 4 years.<br />
20
$0.9bn<br />
Sustained growth in NA Ice Cream<br />
Annual sales<br />
$1.6bn<br />
Acquisition of Ben & Jerry’s<br />
1995 1996 1997 1998 1999 2000 2001 2002 2003 <strong>2004</strong> Est<br />
1995 <strong>2004</strong><br />
21<br />
Underlying sales growth<br />
of 6%p.a. 1995 - <strong>2004</strong> ytd<br />
Further market share gain<br />
in <strong>2004</strong><br />
…….this has helped our North American Ice Cream business<br />
sustain underlying sales growth averaging around 6% per year over<br />
the past 10 years, including this year.<br />
Further market share gained in <strong>2004</strong> with sustained growth in<br />
profits.
Slim.Fast<br />
Phase 1 - restore momentum<br />
50.0%<br />
40.0%<br />
30.0%<br />
20.0%<br />
10.0%<br />
0.0%<br />
Market share: US weight management<br />
Source - IRI (FDTKS+ Wal-Mart)<br />
22<br />
Slim.fast<br />
Low carb<br />
Competitor<br />
2003 <strong>2004</strong><br />
Phase 2 - revitalise the brand<br />
First stage of recovery plan:<br />
• to slow decline from losing consumers to low carb diets<br />
• launch of 20 Low Carb products across bars, snacks, shakes<br />
• Low Carb products now 25% of the portfolio<br />
Share decline stopped, leadership restored<br />
Low carb dieting has brought consumers into dieting but attitude<br />
shifts now creating a gap<br />
Relaunch of the entire ‘classic’ Slim.Fast range as Slim.Fast Optima<br />
addresses this gap:<br />
• real weight loss success based on credible calorie science<br />
• new personalised plans allow you to eat more of your favourite<br />
foods<br />
• new products with balanced nutrition to keep you satisfied<br />
• products with up to 55% less sugar
First to market<br />
Launch of Carb Options was about responding fast to the rising low<br />
carb wave:<br />
• great tasting products at reasonable prices<br />
• where they normally shop<br />
• backed up by national brand endorsement<br />
• from a company with ‘food’ credentials<br />
Low Carb market:<br />
• is large….estimated $3.2 billion sales for <strong>2004</strong><br />
• has stabilised and is actually slightly declining<br />
• is here to stay…..<br />
• <strong>Unilever</strong> has 9% share of low carb market<br />
(CarbSmart,CarbOptions,<br />
Slim.fast low carb)<br />
Recent research (NPD <strong>2004</strong> through August) shows:<br />
• 5% on Atkins / South Beach diet<br />
• 56% ‘trying to cut down on carbs’<br />
Attention to calories, fat and sugar again on the rise<br />
Think of them as the ‘carb savvy, multi-diet style’ consumer<br />
23
Advertising<br />
24
AC Nielsen Markettrack<br />
Healthy Heart - Canada<br />
Market Share of margarine<br />
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03<br />
In the US we are clear number 1 in spreads...<br />
… but here’s an example from Canada - Becel<br />
• Sustained growth since launch in 1978<br />
• #1 Margarine in Canada, 41% share<br />
• Highest brand loyalty & penetration<br />
• “Expert source on heart health”<br />
- endorsement by consumers & health care professionals<br />
• Equivalent of a $1billion brand in US<br />
25<br />
%<br />
45<br />
40<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0
Summary<br />
<strong>Unilever</strong> North America<br />
� Business built with real scale and profitability<br />
� Strong brands driving leading category positions<br />
� Capabilities leveraged across Foods and HPC<br />
To summarise:<br />
North America:<br />
• a strong business built over many years - $11bn turnover<br />
• clear strategic category and brand focus<br />
• lead in 7 categories, number 2 position in the other 4<br />
• exited from others via disposal<br />
• increasingly leveraging <strong>Unilever</strong> scale across categories - e.g.<br />
customer management, supply management, finance, H.R.<br />
26
Summary<br />
<strong>Unilever</strong> <strong>Global</strong><br />
� Scale and geographic reach<br />
� Track record of control of costs and capital<br />
� Commitment to shareholder value<br />
<strong>Unilever</strong>:<br />
Determined to re-ignite re ignite profitable growth<br />
Same principles extended globally…...<br />
• a business with real scale and unsurpassed geographic reach<br />
• strong portfolio of brands and categories<br />
• world class cadre of management<br />
• track record of control of costs (ca. €5 bn p.a savings vs 1999)<br />
and capital (860 bps reduction since 1999)<br />
• commitment to shareholder value<br />
Return to top line growth across the world is number one priority.<br />
27
Antony Burgmans<br />
Chairman <strong>Unilever</strong> N.V.<br />
3 November <strong>2004</strong><br />
28