Magazine article Management Today

Unilever Changes Its Formula

Magazine article Management Today

Unilever Changes Its Formula

Article excerpt

A marketing calamity, which rocked the consumer goods giant to its foundations, was the catalyst for the radical restructuring now under way.

September 1 will be an historic day in the life of Unilever, the Anglo-Dutch consumer products leviathan whose vast portfolio of brands includes Persil, Birds Eye and Walls. On that date, the three-man special committee -- British chairman, Dutch chairman and the chairman-designate -- which has run the group since Unilever was formed will be dissolved. Its place will be taken by a seven-person executive committee, vanguard of the group's most fundamental organisational reformation for three decades.

Appropriately, the date of the special committee's disappearance is also the day on which Sir Michael Perry, chairman of Unilever plc, is succeeded by Niall FitzGerald, an Irishman and the first chairman not to carry a British or Dutch passport. Of all the executives responsible for developing the new organisation, none has been more influential than FitzGerald. Indeed, it is probable that without his insistence on the need for a shake-up the new structure would never have been born. FitzGerald could not have done it without the backing of Perry and of Maurice Tabaksblat, chairman of Unilever NV, or the support of executives below him. But if such a root-and-branch overhaul in a company the size of Unilever can have a single architect, it is the 50-year-old from Dublin.

That is what makes the changes so remarkable. For less than two years ago, FitzGerald, then head of the group's detergents business, was mired in the fiasco of Persil Power, the abortive launch of a new washing powder range which, the company hoped, would at last enable it to outflank Procter & Gamble's Ariel, its arch-rival in the European detergents business. Instead Persil Power proved to be a nightmare. It was launched with an undetected flaw in its accelerator, a catalyst which was supposed to be the Ariel-conquering widget in the Persil packet. In fact, as Procter was quick to expose, acting on a certain combination of dyes, it could ruin garments.

Although FitzGerald's people adjusted the accelerator component, the damage was done. Procter savaged the product until Persil Power itself was in shreds and in the process, the Cincinnati -based group succeeded in driving a wedge between Unilever in Britain, which wanted to keep faith with the revised formula, and the Dutch arm, which was taken aback by the public criticism and lost confidence in the product. The decisive moment came when Tabaksblat, on a visit to Beijing attended by the world's press, confessed that the company had made a mistake.

His impromptu 'nostra culpa' -- ruefully nicknamed 'the Beijing initiative' by Unilever managers in London -- cut the ground from under British executives. Overnight the homely, trustworthy image of Persil, built up over decades, was deeply scarred. The brand, known on the continent as Omo, is still struggling to recover. Last year, the market share of Unilever's European detergents business, Lever Europe, slumped by 1.5 basis points to 20.1%, estimates Henderson Crosthwaite, the London stockbroker. It fell in 14 out of 16 European countries. In Britain, the impact of Persil Power was such that Lever's market share slumped to less than 28%, 3.5 basis points lower than in 1994 and almost 10 percentage points lower than in 1990.

For a while, the Power disaster caused acute tension between London and Rotterdam and unleashed considerable speculation about the position of FitzGerald, who had already been announced as Perry's successor. But, partly thanks to the innate strength of the organisation, partly because of the close relationship between FitzGerald and Tabaksblat, the Unilever leadership has fumed Persil Power from a marketing calamity into a catalyst for much needed change. 'Every big organisation that is running into trouble needs a crisis to convince it of the necessity for fundamental change,' comments Thomas Bayne, chairman of PDP International, a product development organisation which specialises in the fact-moving consumer goods (FMCG) industry. …

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