Sunday, November 15, 2009

The World's Most Influential Companies: Unilever

Location: London
Industry: Consumer Products
Annual Sales: $52 billion

There used to be one way to sell a product in developing markets, if you bothered to sell there at all: Slap on a local label and market to the elite. Unilever (UN) changed that. The Anglo-Dutch maker of such brands as Dove, Lipton, and Vaseline built a following among the world’s poorest consumers by upending some of the basic rules of marketing. Instead of focusing on value for money, it shrunk packages to set a price even consumers living on $2 a day could afford. It helped people make money to buy its products. “It’s not about doing good,” but about tapping new markets, says Chief Executive Patrick Cescau.

“Unilever was among the first to prove you can build brands at the bottom of the pyramid,” says Martin Roll, head of Singapore branding consultancy Venture Republic. Companies from Nokia to Royal Philips Electronics have followed suit.

Priced To Sell
The strategy was forged about 25 years ago when Indian subsidiary Hindustan Lever. found its products out of reach for millions of Indians. HLL came up with a strategy to lower the price while making a profit: single-use packets for everything from shampoo to laundry detergent, costing pennies a pack. A bargain? Maybe not. But it put marquee brands within reach.

Unilever continues to woo cash-strapped customers. In India, it has trained rural women to sell products to their neighbors. “What Unilever does well is get inside these communities, understand their needs, and adapt its business model accordingly,” says Joan E. Ricart, a professor at IESE Business School in Barcelona.
Three years ago the company built a free community laundry in the biggest slum in São Paulo. Named after its Omo detergent brand, the laundry created an oasis of cleanliness that helps explain why Unilever has 70% of the Brazil detergent market—despite charging 20% more than Procter & Gamble’s Ariel brand.