The Player: Niall FitzGerald, Chairman of Unilever: Charting a course for large flotilla
Wednesday 02 June 1999
CHALLENGE: After a period of restructuring the business, Mr FitzGerald says the focus is now firmly on "accelerating top line growth". He recognises that Unilever needs to be more "experimental and adventurous" if it is to continue to anticipate and meet the future needs of consumers. "We have to get well ahead of where consumers are going," he says.
CORPORATE BACKGROUND: Joined Unilever in 1967 and was appointed a director of the company 20 years later. His previous posts include financial director. During his time with Unilever, Mr FitzGerald visited more than 80 countries. He says: "I have seen and worked in many different industries, probably more industries than most people who've job hopped over 30 years." He has lived and worked in five countries on three continents and would "absolutely" do it all again. He is also a non-executive director of Prudential Corporation and Bank of Ireland.
STRATEGY: After its restructuring, the company is now more "value-driven", says Mr FitzGerald, who acknowledges that it had become "a bit comfortable and complacent". He says: "We had a lot of historical baggage holding the business back in Europe and North America." Mr FitzGerald says that only those large organisations that "recognise the need to revitalise themselves" stay the course in the long term. He says Unilever is not a supertanker but "more like a large flotilla which has a common direction".
Within Unilever, the focus is now on a smaller number of bigger brands in each of its product categories. Unilever is a brand-driven business. It has 1,800 brands, but is in the process of slimming its portfolio to those that are number one or two in their respective markets. Mr FitzGerald says the group probably needs less than a quarter of these brands. Among those he expects to continue to prosper are Dove, Lipton, Magnum and Persil.
A few years ago there was a feeling that maybe the glory days of branded goods were over with the rise of high-quality, own-label supermarket products. However, Mr FitzGerald believes that in future "brands will be even more important". They offer "a convincing collection of benefits, delivering consistency over time". He says brands operate at two levels. In the developed world consumers have more choices but less time and so they "fall back on proven brands that deliver the benefits they want". Time pressure on customers is expected to lead to more of Unilever's products being distributed via the Internet and direct mail outlets.
In emerging markets, brands are important for another reason. "If you have a limited amount of disposable income you can't afford to make a mistake," says Mr FitzGerald.
Unilever recently announced that two of its UK food businesses, Van den Bergh Foods and Birds Eye Wall's, would stop using, for the time being, genetically modified ingredients in response to consumer concerns. Mr FitzGerald thinks there has been a "degree of misrepresentation" in the UK media debate about GM food and that consumers have not been informed of the benefits, which over time he says, "are immense". In the meantime, he thinks there will be "a regrouping that will take probably three or four years".
Unilever operates in more than 100 countries. Within Europe and the US there has been a strategic move away from country-based company structures to regional structures. In each of its markets Unilever wishes to keep in touch with local tastes while making use of the scale and scope of the $50bn (pounds 31bn) group business and maintaining its core values. "Multi- local multinational" is the description the company likes to use for this federal approach to business.
MANAGEMENT STYLE: "I think I am open," says Mr Fitz Gerald, who often meets the middle managers. He thinks it is "essential" to skip several levels in the organisation "to keep engaged with and get stimulus from young minds and young ideas". Under the "Foresight Project" 20 of the group's brightest young managers were given the task of anticipating consumer trends in 2010 for the purpose of strategic planning.
MOST ADMIRES IN BUSINESS: "People who have changed things", particularly those who have presided over big changes within large organisations. Mr FitzGerald says such changes are difficult to make against in-built lethargy. "Most people initially don't like change," he says.
CITY VERDICT: Paul Deacon, an analyst at Goldman Sachs, says "there is still a long way to go to improve the financial performance of the business". However, noting the improved operating margin over the past three years, he thinks that Mr FitzGerald is doing "a very good job". The process of streamlining the brand portfolio will take some time. "You can't dump them overnight," says Mr Deacon but he says that once the process is completed it would have a "very dramatic impact" on the financial performance. Unilever has been on Goldman Sachs' European Recommended List since the end of 1995. The share price has been volatile, reflecting polarised views on the company, but Mr Deacon says at its current valuation, "it looks very attractive".
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