A move by Unilver to shed some of its laundry brands reminds me of that ‘How Long Can P&G Last?‘ opinion piece I wrote back in June. In the piece I argued that ‘holding companies’ like P&G and Unilever with armies of brand managers are going to have a hard time creating real brands that connect with the modern consumer. (The piece caused quite a lot of discussion – go read!). Now, I notice that Unilever is backing out of a category it helped create – laundry products – because it didn’t think it could compete with P&G and private label brands.
We keep hearing stories about how P&G and Unilever are changing to become ideas-led companies but the latter’s wholesale removal from a category suggests that it’s simply not the case. Brandweek reports on the sale:
Global private equity firm Vestar Capital Partners today acquired Unilever’s North American laundry business for $1.08 billion in cash.
Brands such as Snuggle, Wisk, Surf and Sunlight will now be marketed and handled under a new company, The Sun Products Corp., which was formed when Vestar Capital Partners merged its business entity, Huish Detergents, with the newly acquired brands. Based in Salt Lake City, Huish Detergents is the largest manufacturer of private label detergents and fabric softeners in the U.S. Vestar bought the company in March 2007.
…Unilever Group chief executive Patrick Cescau said the move allows the company to focus on expanding leading brands outside of North America, while getting rid of “nonstrategic brands” with high turnover. In 2007, Unilever’s North American, Canadian and Puerto Rican laundry business resulted in $1 billion in turnover for the company.
Meanwhile new entrants such as Method seem to be doing rather well by introducing simple innovation such as concentrated and eco-friendly versions.
When it’s easier to sell part of your company to VCs rather than sell your products to consumers, maybe you should worry about whether you can help those non-”non-strategic brands” out too.
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While as someone who works in the branding field, I wouldn’t defend Unilever brands in any way, this blog post is sorely off the mark when it comes to understanding this transaction. Vestar Capital Partners is not a “VC” firm, it’s a private equity firm that is doing a leveraged buyout of Unilever. In our current economic conditions, you’ll note that there aren’t many IPOs going on, but the time is ripe for LBO (leveraged buyout). Vestar is betting that Unilever brands are under-valued, not that they’ve run out of ideas. While there’s a chance that Vestar could introduce new brand management, I think the real discussion should be whether there are examples out there of private equity firms helping build better brands or if they’re just vultures? My perception is that these types of firms are pretty conservative…and they probably don’t read psfk.
July 31st, 2008 at 12:05 pm
Surely this move is more territorial than brand led?
Unilever are weaker in the U.S. than P&G, but stronger in emerging markets. So they’re selling some of their struggling businesses in one region to facilitate growth in another.
I think it’s more business led than marketing/brand led…
August 4th, 2008 at 10:37 am
Yes!–“coming up with real brands that connect with the modern consumer” is exactly the challenge that these CPG companies face. Much like journalistic challenge for the small and nimble PSFK or a larger media behemoth, is “coming up with real articles that resonate and drive interest from the modern audience”. Since I comment back, you have been “successful” in some regard.
First, let us delve into what defines “success” in this space? I love what Method has done, but their market share is very small compared to the large players. If success is measured by interest from the press, then surely journalists will declare victory for the smaller, more nimble operation for introducing forward-looking “green” products with innovative design. If success is measured by market share relative to their competition, then Method has not done as well as the larger players.
Method gets their talent from the “armies of brand managers” at P&G, General Mills, Kraft, Unilever, etc. So if you want to claim Method is more “successful”, what is the cause? Is this due to the knowledge, skills, and experience that these brand mangers attained while at a large corporation? Or is it that Method provides the more inspirational, lean, and entrepreneurial environment to foster this success in innovation? Surely, both these share credit for the cause. So, if these brand managers are of the same general background, why then are smaller players so much more well equipped for the ‘challenge du temps’ than the major players? And if there is a justifiable cause (such as superior process, culture, collaboration) why is this not better reflected in their relative market share?
August 11th, 2008 at 8:07 pm