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Unilever

Last edited by Hidayat on September 3, 2008 - 6:35pm
Company Snapshot: 

The Unilever Group consists primarily of Unilever NV and Unilever PLC and is one of the world’s top makers of packaged consumer goods and sells products like deodorants, fragrances, soap, margarine, tea and frozen foods all over the world. Unilever controls subsidiaries in at least 90 countries and is one of the world’s top food firms. It is also one of the worlds largest packaged consumer goods company, with Procter & Gamble. Unilever does not retail under its own name, doing most of it's business under brand names such as Jerry’s, Lipton, Slim-Fast, Iglo, Unox, Becel, and Lever2000. They’re all part of the "Unilever armada of brand names".

Ownership status: 
Publicly traded
Number of employees worldwide: 
180,000
Chief executive officer: 
Patrick Cescau
2008 Global Fortune 500 rank: 
122
Website: 
http://www.unilever.com/
Corporate accountability
Accountability overview: 

Genetically Modified

Unilever was the first multinational company that started using genetically modified (GM) products. Their "Beanfeast" range (which is now being sold) contained GM soya. A tiny asterisk attached to the ingredient list was the only mark to warn consumers. Bachelors Beanfeast contained soya beans which had genetic material from a virus, a bacteria and even the petunia plant inserted into them. Unilever received more than 3,000 phone calls from angry consumers in the UK. By spring 1999, it was forced to withdraw Beanfeast, its flagship GM food product and to agree to phase out all GM products.

Slim-Fast

Slim-Fast was bought by Unilever in 2000, and is now one of Unilever’s top-performers. Unilever CEO FitzGerald likes to say he bought the ice-cream company Ben & Jerry's on the same day he bought Slim-Fast because "one makes you fat, and the other makes you thin".

Slim-Fast sells shakes (milk- or soy-based), drink powders, and snack bars through retailers in the US and Europe under the Slim-Fast and Ultra Slim-Fast names. As these names suggest, Slim-Fast capitalizes on the needs of weight-conscious consumers. It has marketed products aggressively, hiring celebrity endorsers such as former baseball manager Tommy Lasorda and TV's Kathie Lee Gifford; Lauren Hutton is the company's latest spokesperson.

Omo Detergent

Omo is a blue detergent powder launched in 1954, and became the Unilever spearhead in the synthetic detergent market. New Blue Star Omo was introduced at the end of March 1963. Today, Unilever is aggressively promoting Omo all over Asia and Africa, packaged in quantities down to 35 gram. Unilever’s brands Persil, Omo and Skip (other Unilever brands include the pre-war brand Sunlight, Sun, Vim and Surf) are engaged in fierce competition with Procter & Gamble's washing powder brands for pole position in just about every world market.

P&G was the first to use one brand name for its leading detergent (Tide) in some countries and another brand name, with a different package (Ariel) in the others. Unilever copied this policy. The company markets Surf in many countries and Omo in the remainder. The products are almost identical. But the packages are dissimilar enough that retailers stock Surf in the same section with Omo, often at the same price, so consumers must believe they are different products.

Door to Door Sales

Salesmen in Unilever uniforms act as mobile advertisements, and by travelling door-to-door develop personal relationships with shopkeepers. They are paid extra if they hit targets. Tanzania has 100,000 retail outlets across the country, in 9000 villages. With half the population living below the poverty line, consumers buy rice, maize and flour in tiny quantities every day from mini kiosks in lanes that are too narrow for vehicles. While Unilever delivers goods by van to big shops in towns, it had to find another form of distribution for outlets in inaccessible villages. In December the company came up with a pilot scheme to address this problem: the "bicycle brigade".

Salesmen are given bicycles with large boxes welded onto the back to transport small packs of detergent powder, margarine, soap and oil. Each salesman visits about 20 to 30 shops, following a fixed itinerary. Small Omo detergent packs and Blue Band margarine have become market leaders, and Key soap, launched last December, has wrested 15% of a highly competitive market in just eight months.'

Labor: 

Smashing Unions, Violating Rights

Unilever systematically violates worker and trade union rights through direct attacks on trade unionists (involving armed police as well as hired thugs) as well as aggressive outsourcing and casualization. recent examples include:

  • The deployment of Elite Force paramilitary troops and police at the Unilever factory in Rahim Yar Khan, Pakistan, in response to union protests against * management's attempts to transfer machinery to an outsourced production site and the union's plan to organize 292 temporary workers. The armed police and Elite Troops were used to enforce the mass dismissal of all 292 temporary workers on 20 October 2007.
  • In July 2005 Unilever’s subsidiary in India, Hindustan Lever, sold its Bombay factory to a company called Bon Limited for a mere $10,000. Two months later Bon Limited made an application to the Government to close the factory and retrench the 911 members of the Hindustan Lever Employees Union (HLEU). The fraudulent transfer of ownership from Hindustan Lever to Bon Limited - which is the subject of a criminal complaint filed by HLEU - is an attempt by the Unilever management to break the union’s collective bargaining power and transfer production to areas where there are greater tax concessions.
  • Management at the Unilever factory in the Doom Dooma Industrial Estate in the north eastern state of Assam, India, locked out the union's 700 members on 15 July 2007. Management's condition for ending the lockout is that the union must be disbanded and that all workers transfer their membership to a new union created by management - the Hindustan Uniever Democratic Workers Union. Those who refused were threatened and beaten by thugs hired by the company's contractors. As the struggle escalated Unilever management requested the local police to intervene, detaining and charging a shop steward, and intimidating and threatening the workers who refused to accept the management's "new" union.
  • On 26 June 2008, members of the Selecta Walls Inc. Independent Labour Union (SWI-ILU) in the Philippines stopped work and staged a mass walk-out, disrupting production at one of Unilever’s largest ice cream plants in Southeast Asia. The walk-out followed management’s violation of the collective agreement and its violation of an agreement sponsored by the National Conciliation and Mediation Board (NCMB) that includes: maternity benefits; negligence and late wage payment by third party contractors. Earlier in the year Unilever management rejected all attempts by the union to negotiate changes to working hours. The union is fighting for an 8-hour day, seeking to replace the current compulsory 12-hour shifts (for a basic wage) with 8-hour shifts plus 4 hours overtime.
  • At the Unilever tea factory in Khanewal in Punjab Province in Pakistan there are 22 unionized regular workers and over 750 non-unionized casual workers. Many of these casual workers have worked at the factory for 10 to 15 years, producing its famous "Brooke Bond" tea brand, but they have been underpaid and deprived of employment security, as well as being denied the right to join the union. The situation at Unilever's tea factory in Karachi is not much better. At the Karachi factory, where both Lipton and Brooke Bond tea is produced, there were 133 unionized regular workers and 700 casual workers. On 2 September 2008 Unilever Pakistan closed the Lipton factory and completely outsourced production.

Slashing Jobs, Aggresive Outsourcing

After the new round of job cuts in Europe in 2008 Unilever's global workforce will number about 160,000. At the start of the company's Path to Growth Strategy in 2000 there were 300,000 workers employed by Unilever worldwide. So if jobs were cut by 47% in seven years, where was the growth?

Profits grew. In just the first three years of the Path to Growth Strategy net profit increased 166%. Following lower profit growth in 2005, there was a 20% increase in net profit to €2.1 billion in 2006. In fact when the new job cuts were announced in July, Cescau also announced a 16% increase in second quarter profits for 2007. That translates as: "Profits are up thanks to all the increased productivity and output created by our employees, so we'd better cut more jobs!"

Executive golden handshake grew. When CEO Niall Fitzgerald left Unilever in 2004 he got his £1.2 million salary plus cash from share options that boosted this to £3.7 million. Another £3 million was added to his pension. In the end he received a £17 million golden handshake.

Executive pay packets grew. In 2005 the Unilever CEO’s salary rose 43% and the CFO’s salary rose 30%. As Unilever’s new CEO Cescau earned €2.5 million and the Chief Financial Officer earned €1.43 million in their first year on the job. The wage bill for the top Unilever executives in 2005 was €11.1 million. But that was just their basic salaries. They also earned a lot more through share options!

Management stock options grew. Back in 2002 Niall Fitzgerald told senior managers that: “Our philosophy is if we are capable of beating them in the marketplace, then we are capable of beating them in shareholder value and you will be rewarded accordingly.” Under its Reward for Growth remuneration scheme share options were extended to 7,000 managers around the world. So at the bargaining table are we talking to a manager with an interest in running the plant, or a shareholder interested only in sucking out cash?

So-called shareholder value grew. The Path to Growth Strategy was simply an attempt to please financial markets and satisfy institutional shareholders like pension funds, investment banks, insurance firms and fund managers. It was not based on real growth in production, productivity and jobs, but merely on growing financial returns. Back in November 2004 the Chairman of Unilever NV, Antony Burgmans made a presentation to the investment bank Morgan Stanley. In this presentation three “global dimensions” of Unilever are listed: Scale and geographic reach; Track record and control of costs and capital; Commitment to shareholder value. This third point was repeated throughout the presentation, with the concluding bullet point putting to rest any fears among shareholders that management was hoarding funds for outrageous uses such as re-investment in production: “Unilever fully committed to driving shareholder value”.

  • This commitment is realized in the release of €16 billion in cash to shareholders in 2000-2004 and €30 billion in 2005-2010.
  • Last year the sale of Unilever's European frozen foods division to a private equity fund managed by Permira generated €1.2 billion in cash that was channeled directly into share buybacks and dividends.
  • When Cescau announced the new round of 20,000 job cuts in Europe, he claimed this “shakeup” would generate €1.5 billion in cost savings that would deliver even greater shareholder value.

Precarious employment grew. A Unilever presentation to investors in 2003 includes a slide entitled “Improving asset efficiency, releasing cash” where increased outsourcing of production from an average 15% to “25%+” is listed as an “achievement”. The emphasis is on the "+" which actually means at least 25% of production should be outsourced. As we've already seen, outsourcing and casualization have increased dramatically in the past five years. The logical outcome of this kind of growth is the example of Unilever's tea processing & packing plant in Khanewal, Pakistan, where 97% of the workforce is casual!

With all this outsourcing & casualization, maybe the number of workers employed in the manufacture and distribiution of Unilver products globally is still 300,000 or maybe even more. The only real change is that Unilever doesn’t recognize half the global workforce as employees, and doesn’t pay them the wages and benefits that unions have successfully fought for and negotiated. So the real growth that Unilever executives have focused on - the growth that transfers €30 billion into financial markets - is the growth of non-union workplaces. Without unions the new generation of Unilever workers aren’t able to fight for a share of growing profits and corporate cash flows. Maybe that’s the real strategy in the Path to Growth Strategy.

Environment and product safety: 

In India Unilever has been accused by Greenpeace of double standards and shameful negligence for allowing its Indian subsidiary, Hindustan Lever, to dump several tons of highly toxic mercury waste in the densely populated tourist resort of Kodaikanal and the surrounding protected nature reserve of Pambar Shola, in Tamilnadu, Southern India.

Greenpeace activists and concerned residents cordoned off a contaminated dump site in the center of Kodaikanal to protect people from the mercury wastes that have been recklessly discarded in open or torn sacks by Hindustan Lever which manufactures mercury thermometers for export, mainly to the United States. According to Hindustan Lever, from there, the thermometers are sold to Germany, UK, Spain, USA, Australia and Canada. The factory, set up in 1977, was a second-hand plant imported from the United States, after the US factory was shutdown for ‘unknown reasons’. Workers at the factory are offered no protection from the mercury spills and several workers have complained of health problems which, they allege, is caused by their exposure to mercury in the workplace. Mercury is highly poisonous and exposure to even the small amount through air, water or skin, exerts severe effects on the central nervous system (brain) and kidneys. Fetuses and young children are particularly vulnerable to poisoning by mercury.

Anti-competitive and consumer protection: 

Misleading marketing

The UK Advertising Standards Authority (ASA) has recently accused Unilever for false advertising. The ASA ruled that Unilever misled British consumers in the way the company presented the health benefits of its cholesterol-lowering margarine, Flora pro-activ. According to ASA, Unilever’s Van den Bergh Foods unit overstated the benefits of Flora pro-activ in one press advert that claimed it could reduce LDL cholesterol by 10 to 15 percent. After the ASA ruling, Unilever agreed to make the required changes and not advertise in the same way again.

The Tea Market

Unilever is the world’s largest tea company, and owns 18,000 hectares of plantations in Kenya, Tanzania and India. It controls 20% of the market (most likely these 1999 figures have changed), through its ownership of the Brands Lipton’s and Brooke Bonds. Consequently, it has major power over the tea price. In the mid 80’s, when the Indian tea price started to rise, Unilever and other corporations acted to bring it down by temporarily boycotting Indian tea. When the Indian government tried to set a minimum export price, the multinationals collectively withdrew from the market, forcing the government to retreat, and slash the price.

Monopoly Practices and Political Bullying

In several countries Unilever is under investigation for price fixing, cartel arrangements and monopoly control. In Pakistan the newly created Competition Commission of Pakistan (CCP) trying to investigate Unilever's monopoly practices, but the company has responded by seeking out political protection and resorting to threats. When Unilever Pakistan sold its Dalda edible oil brands to a group of former managers, creating Dalda Foods, in 2004 it signed a deal and handed over Rp. 250 million (Euro 2.2 million) to ensure that Dalda wouldn't compete with Unilever's products. In fact, Unilever's global brand Blue Band is produced at the Dalda factory. This is now the site of a major struggle against union-busting. In 2006 the Monopoly Control Authority (MCA) of Pakistan ruled that the agreement between Unilever Pakistan and Dalda Foods violates anti-monopoly and competition laws, ordering Unilever to terminate the agreement and take back the Rp. 250 million. Unilever simply ignored the order. Last year the MCA was replaced by the Competition Commission of Pakistan (CCP) under a new law. On 28 July 2008 the Chairman of the CCP, Khalid A. Mirza, was interviewed by Business Recorder concerning the way "vested interests have ganged up against the CCP" to stop it investigations. "We have been receiving even threats'", Khalid Mirza says. Note that Unilever is cited as a prime example:

'Business Recorder: Can CCP summon any multi-national company?'

'Khalid A. Mirza: Yes, I have done so. Unilever is an example. But they go straight up to the top of the government and pressure comes from all the sides. I have to face it and mange it. It comes from family, friends and even from the top of the government.'

Political influence: 

Unilever was one of the 450 multinationals taking part in the Geneva Business Dialog, a meeting, taking place late September 1998, which marked the beginning of a growing (increasingly formalized) relationship between the UN and the ICC. The Geneva Business Dialog was convened in order to ‘bring together the heads of international companies and the leaders of international organizations, so that business experience and expertise is channeled into the decision-making process for the global economy’ (according to ICC President Helmut Maucher, CEO Nestle).

The dialog between the ICC and the UN is an ongoing one, and includes regular meetings at the highest level. And while the ICC appears to have consolidated its hold on the UN’s activities in the economic realm, another global lobby coalition has long been an active partner in the UN’s work on environment and development. The World Business Council for Sustainable Development (WBCSD) , which describes itself as "the pre-eminent business voice on sustainable development" was the first corporate lobby group to force an institutionalized partnership with the UN. Unilever is one of the 150 multinationals taking part in the WBCSD. Practical cooperation between business and UN agencies like the UN Conference on Trade and Development (UNCTAD) and the UN Development Programme (UNDP) is also becoming routine.

Wanting to take advantage of the UN’s receptive stance towards the private sector, lobby groups such as the International Bioindustry Forum (IBF) increasingly target the UN. The IBF, an umbrella group of national and regional associations such as EuropaBio, BIO, BIOTECanada, and the Japan Bioindustry Association, is concerned by the growing culture of regulation resulting from widespread public concern and the backlash against biotechnology, particularly GM food products. By bringing the world's most powerful and influential biotech companies, such as Unilever, Monsanto, Nestlé, Novartis, Pfizer, and DuPont together, the IBF lobbies to prevent the adoption of potentially industry unfriendly agreements in the UN, and to transform the UN and its agencies into promoters of biotechnology.

Critics have recently hit the newly released Human Development Report (2001) of the United Nations Development Program (UNDP) for blind biotech bias, stressing the report presents as facts the unsubstantiated promises of the genetic engineering (GE) industry while dismissing the environmental risks and ignoring the real challenges of agriculture in developing countries. Various civil society organizations strongly disagree with the main messages contained in the UNDP Human Development Report 2001.

Brands Unilever is known for include Amora, Axe, Becel, Bertolli, Blue Band, Calvé, Cif, Close Up, Comfort, Country Crock, Domestos, Doriana, Dove, Flora, Heartbrand, Hellmann's, Knorr, Lifebuoy, Lipton, Lux, Omo, Pond's, Radiant, Rama, Rexona, Signal, Slim·Fast, Sunlight, Sunsilk, Surf, Vaseline and Wish-Bone.

History

Butter & Soap

Unilever was formed in 1930 when the Dutch margarine company Margarine Unie merged with British soapmaker Lever Brothers. Both companies were competing for the same raw materials (e.g. oilseeds), 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. Margarine Unie grew through mergers with others margarine companies in the 1920s. Lever Brothers was founded in 1885 by William Hesketh Lever. Lever established soap factories around the world, and had plantations in many Third World countries. In 1917, Lever began to diversify into foods, acquiring fish, ice cream and canned foods businesses.

Control of the supply chain

In Unilever one activity has frequently led to another. The oil seeds crushed for use in margarine and soap yielded a by-product known as "cattle cake" which prompted a move into animal feeds. Processing the oil for use in margarine and soap yields other by-products, glycerine and fatty acids, which led Unilever into chemicals, a $2-billion business in 1986. In 1997 Unilever sold its specialty chemicals business to Imperial Chemical Industries (ICI) for US$8bn. Those millions of consumer products need to be packaged, which resulted in Unilever operating twenty-four packaging plants in six European countries. Consumer goods must also be transported, which turned Unilever into one of the largest truckers in Britain - and for fifty years, before it was sold in 1985, the Unilever-owned Palm Line was one of the biggest shipping companies out of West Africa.

Fishing is another area of interest. Unilever farms for salmon in Scotland, has prawn farms in several Asian countries, and is the major owner of a vertically integrated fishing business out of West Germany that includes catching the fish in deep-sea trawlers, processing the catch, and then selling the fish in company-owned shops and restaurants that carry the Nordsee name. Unilever made a public commitment to move towards buying all its fish from sustainable fisheries by 2005. To meet this objective Unilever and the World Wide Fund for Nature (WWF) jointly set up the Marine Stewardship Council (MSC) as a platform to promote sustainable fishing internationally (1996). The MSC is now said to be an "independent, non-profit body with a set of principles and criteria for sustainable fishing".

Acquisitions

Major acquisitions during the 80s included Brooke Bond in 1984, greatly strengthening the Unilever’s tea interests, while Chesebrough-Pond’s Inc, in 1987, brought a major additional stake in the US personal product market, as well as strengthening Unilever’s position in the world skin care market.

Again, in the 90s, there were numerous acquisitions, and Unilever began to put into effect its planned moves into Eastern Europe. However, the company largely withdrew itself from packaging and all agricultural operations, apart from Plant Breeding International Cambridge (R&D based company developing products in the agriculture and horticultural sector) mainly under license, sold to Monsanto in 1998 and the plantations. Much of the company’s agribusiness assets were sold as part of the company’s policy to focus on its core activities.

Strategy

In September 1999 Unilever announced its intention to focus on fewer, stronger brands to promote faster growth. The company is whittling its brands down to 400 (from 1,600) including familiar brands such as Dove, Lux, Lipton, Magnum and Calvin Klein fragrances. Consulting firm PricewaterhouseCoopers has been hired by Unilever to sell off ten of the firm’s 70 food brands.

The concentration on innovation and brand development on a focussed portfolio of 400 leading brands is part of Unilever’s latest growth strategy, called ‘The Path to Growth’, designed to accelerate top line growth and step up the rate of margin improvement in five years time. In February 2000 the company announced a series of linked initiatives (organizational changes, restructuring) to align the entire organization behind these growth ambitions.

The shake-up of its top management, splitting the company into two, separate global units –food and home, and personal care-- was one of these initiatives. And Unilever has started selling off any subsidiary businesses which are making less than average profits, and decentralising control of subsidiaries, with the corporate HQ in Europe just monitoring profit levels – and making sure they are maximized. This heavy focus on profit means cost-cutting - especially minimizing workers’ pay.

Another key component of the growth strategy is online sales. Unilever wants to step up the use of the Internet in order "to improve brand communication/marketing and on-line selling & to simplify business-to-business transactions throughout the supply chain". India’s Satyam Computer Services Ltd won an information technology services contract from Unilever. Unilever also made deals with Compaq, IBM, Microsoft, Excite@Home, Ariba Inc. (leader in all phases of business-to-business e-commerce) and WOWGO to enable a faster adoption of global e-commerce opportunities. In February 2000, Unilever and iVillage formed a new Internet company.

In its bid to concentrate on fewer, core brands, Unilever disposed of 27 businesses during 2000 for a consideration of approximately $642 million. The company sold, amongst others, the European Bakery Business, Benedicta a culinary business in France and various other small businesses and brands. The same year, Unilever acquired several high-profile companies, including American based Bestfoods, which strengthened Unilever’s market position remarkably. Other important acquisitions were Groupo Cressida Central America Foods (Home & Personal Care) Corporation JABONERIA NA (Ecuador, Foods, Home & Personal Care), Amora Maille (France, Culinary Products) Codepar/SPCD (Tunisia, Home & Personal Care), Ben & Jerry's (USA, Ice Cream), and SlimoFast (USA, Slimming Products). The total purchase consideration for businesses other than Bestfoods (total number: nineteen) was approximately $4,451 million. The acquisition of Bestfoods made Unilever's foods business the world's second largest after Nestle.

Unilever keeps selling businesses. In 2002, Unilever sold at least 19 of its food brands including cleaning firm DiverseyLever and cooking oil firm Mazola. Brands that are here to stay include Hellmann’s mayonnaise, Bird’s Eye, Persil, and Ben & Jerry’s ice cream. On these brands Unilever will focus its advertising efforts. The company has closed several big advertising deals on airtime with Carlton and Granada. Also, Unilever struck a massive deal with billboards company JCDecaux, the biggest poster contractor in Europe. The French firm will handle all Unilever’s poster advertising across 22 European countries for the next five years.

Outlook

Views on Unilever’s performance vary. On 28 August 2001, Credit Suisse First Boston (CSFB) downgraded Unilever from a "hold" to a "sell" rating, highlighting analysts’ and investors’ concerns about the performance of Unilever and the integration of Bestfoods. Unilever, on the other hand, is optimistic, saying it saw sales rise 35% by June (2001) and that estimated annual savings of US$32m will result form the acquisition.

Financial information
Major lines of business/segments: 
  • Home and Personal Care (HPC) Products include cosmetics, perfumes, personal wash, soap, toothpaste, deodorants, shampoo, fragrances, detergents for fabric cleaning, diagnostics (e.g. pregnancy tests)
  • Food Products include tea, ice-cream, fish, margarine, frozen foods, spreads & cooking products, salad dressings, culinary products, meat snacks, olive oil, cheese
  • Professional cleaning: DiverseyLever provides cleaning and hygiene products and services to industrial and institutional customers
  • Plantations, Plant Science and Trading Operations: Unilever operates tea plantations and develops raw materials for the vegetable, tomato, edible oil and bakery categories. The company also has oil milling operations.
Additional descriptive data
Link to full list of subsidiaries: 
Corporate Watch: Who, Where, How Much?
Sources
Watchdogs and related campaigns: 
Corporate Watch UK
McSpotlight
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