Restructuring Unilever: The 'Path To Growth' Strategy|Business Strategy|Case Study|Case Studies

Restructuring Unilever: The 'Path To Growth' Strategy

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Case Details:

Case Code : BSTR095
Case Length : 17 Pages
Period : 2000 - 2003
Organization : Unilever
Pub Date : 2004
Teaching Note :Not Available
Countries : Europe
Industry : FMCG

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It (Path to Growth strategy) is all about how we can reshape ourselves for faster growth and expanded margins."

- Niall FitzGerald, Co-Chairman, Unilever Group, in February 2000.1

A Troubled Giant

In September 1999, Unilever, one of the largest consumer goods companies in the world, announced plans to restructure its brand portfolio by end of 2004.

The plan involved cutting down on its unwieldy portfolio of 1,600 brands and focusing on the top 400 brands. This move was read by the market as an indication that the company was unable to manage its brands and so was scaling back growth plans. This development, coupled with the fact that the growing popularity of Internet and telecom stocks was luring investors away from old economy stocks, resulted in Unilever finding itself in deep trouble - its stock price plummeted rapidly during 1999. According to reports, Unilever's market capitalization of about 51 billion ($82 billion) in June 1999 shrank by almost 20 billion by January 2000. As a result, the company lagged far behind its competitors like Nestle and Procter & Gamble (P&G) in market capitalization.

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The fact that Unilever had failed to meet its performance expectations for 1999 added to its problems. Analysts attributed this failure to the sluggish growth of its top line brands. They said that the company's existing brand strategy framework had lost its focus. They also criticized Unilever for investing less in strengthening its leading brands during the 1990s (as a majority of its investments went into business restructuring and acquisitions).

Meanwhile, the competitors had begun eating into Unilever's market share in a major way. Unilever realized that it had to restructure its brand portfolio and operations to meet the challenges brought about by the changing market conditions. In February 2000, the company announced a €5 billion five-year growth strategy, aimed at bringing about a significant improvement in its performance. The initiative was named the 'Path to Growth' Strategy (PGS). The exercise involved a comprehensive restructuring of operations and businesses. While many industry observers welcomed the move, some were skeptical about the slow-moving old economy giant's ability to regain its momentum in time to meet the intensifying competition.

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1] "Shrinking to Grow," Economist, February 26, 2000.


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