Less is more? Unilever to slash SKUs by 30% by end of 2014
The company has already cut a lot of SKUs but still has more than 50,000 and wants to complete the process by the end of next year, said Unilever, although it didn't give out 'before and after' numbers.
Chief marketing and communication officer Keith Weed also announced plans to cut marketing jobs (a 12% reduction in marketing headcount) and focus more on digital campaigns, which now account for 15% of Unilever’s ad spending vs 12% in 2011.
His comments came a day after Unilever unveiled its ‘Go Global’ program, where it has invited companies to pitch digital marketing pilots for its global brands, with the successful applicant securing $100,000 in cash, mentorship, and in-kind services.
Applications are open until January 17, 2014, after which shortlisted companies will be invited to pitch to seven of Unilever’s brands at the Mobile World Congress in Barcelona.
CEO Paul Polman - who told analysts on the latest earnings call that “we were as disappointed as you were” with Unilever’s recent performance - said home and personal care was holding up well but the food business continued to be held back by a weak performance from spreads (which account for 7% of group sales).
Panmure Gordon: It’s difficult to see spreads not improving somewhat from a lousy 2013
Graham Jones, executive director, equity research, consumer staples & food retail at Panmure Gordon, said he was disappointed that Unilever execs spent three and a half hours talking about personal care, and just 10 minutes on spreads - the key problem area in its portfolio: “Much of the day was dedicated to Personal Care, the star of Unilever’s portfolio, where brand plans in our view remain typically impressive.
“However, we were disappointed at how little Unilever discussed its problem area of Spreads, and aside from finding an additional €500m of cost savings for [fiscal] 2014, we are still not convinced Unilever has found the solution as to how to enable its impressive Personal Care business to flow through to a better group performance.”
'Only about 10 minutes was given to the problem child of Spreads'
But he added: “It’s difficult to see spreads not improving somewhat from a lousy 2013.”
Discussing whether selling the spreads business was an option, Polman said things were beginning to turn around, highlighting recent launches such as I Can't Believe It's Not Butter! Deliciously Simple, and Country Crock Simply Delicious, which have a more 'natural' positioning.
But he added: "Having said that, we will look at all options to be sure that it gets the return that this business deserves and we will be very open-minded about that."
Speaking to analysts in April, Investor Relations boss James Allison said: “We know that margarines are particularly healthy but consumers are not perceiving them to be natural versus butter."
Asked for more details on the job cuts, a spokeswoman said Unilever was "not sharing any additional details about when or where this will take place". Asked about the SKU count, she said: "On the SKUs, there will be a reduction of 30% by the end of next year. We currently have over 50,000 SKUs, and although some of the reduction has already taken place, we're not currently giving any more detailed breakdown."
One the cost saving program, she added: "It's designed to increase agility, responsiveness and efficiency and ensure we remain competitive and generate more to invest for long term, sustainable growth. This includes: simplifying some major processes in the company, for example: 30% SKU reduction; sharper marketing processes, organisation and execution; and streamlining product formulations – all of which combined will contribute to an incremental €500m savings."
