Supplier insights: Unilever’s five future-facing strategic choices

Date : 11 February 2021

Maxime Delacour

Senior Retail Analyst

Unilever closed its FY 2020 with underlying sales growth (USG) of +3.5% in Q4, bringing the full year USG to +1.9% for a total turnover of €50.7bn. During this challenging year, Unilever took the decision to prioritise volume-led competitive growth, absolute profit and cash delivery. The group is now looking into the future, announcing a strategy refresh, focused on five key areas.

Source: Unilever

Develop the portfolio into high growth spaces

The company will continue to evolve its portfolio towards higher growth, assessing the potential of the different markets and categories and routes to leadership. On top of this, five categories stand out and have been identified as strategic for growth: hygiene (Home care and BPC), skin care (priority for perennials), prestige beauty, functional nutrition and plant-based foods.

As a result, spreads and tea categories are falling outside of this focus. Unilever is expected to continue to reshape its portfolio where brands and categories are not aligned with the new priorities.

Win with brands as a force for good, powered by purpose & innovation

With Millennials and Gen Z now making most of the adult population globally, companies need to align with their expectations, especially around sustainability and the purpose of brands. Unilever aims for its various brands to take more leadership positions and drive meaningful and tangible actions to create a positive impact socially and environmentally. The four areas where Unilever will take action are:

  • Improve the health of the planet
  • Improve people’s health, confidence and wellbeing
  • Contribute to a fairer, more socially inclusive world
  • Win with differentiated science and technology

Accelerate in the US, India, China and leverage emerging markets strength

The US, China and India currently account for 35% of the group’s turnover. In the US, the focus will be on competitiveness within the different categories. In the US,  the opportunities for the Prestige Beauty and functional nutrition categories are expected to be the biggest. . Investment will be focused in this country.

In India, Unilever is in a strong leadership position. The group will continue to focus on winning volume share thanks to its well-established brands and the support of new brands, such as Holricks. In China, the focus will be on increasing the penetration via partnerships with the likes of Alibaba and JD.

Finally the other countries identified by Unilever as markets of the future are Brazil, Indonesia, the Philippines, Turkey, Thailand and Mexico. Each of these markets is currently delivering a turnover of more than €1bn.

Lead in the channels of the future

The COVID-19 pandemic accelerated the development of the ecommerce channel. Unilever ecommerce sales grew by 61% and now make up 9% of Unilever’s total turnover. The company is now targeting this channel by sub-channels. It enables a better understanding of the needs of pure-play and omnichannel retailers as well as a deeper understanding of the different models including social commerce, fast delivery and live streaming ecommerce.

This also had a direct impact on Unilever’s eB2B businesses. The company estimates there are around 14m small and independent stores across Asia and LatAm. Currently, Unilever’s eB2B service only reaches 1.5m of these stores but it’s growing rapidly and so has been identified as a key sub-channel for growth. To drive growth, the company is ensuring its innovation and merchandising strategies are driven as much as possible by shopper insights.

Build a purpose-led, future-fit organisation and growth culture

Unilever aims to achieve this by developing agile ways of working by redeploying resources either temporarily or permanently, leveraging automation and accelerating the digital transformation. Fostering an inclusive and diverse culture and eliminating any barriers that could limit employees' ability to achieve their full potential are priorities for the business. In addition, the company will continue to build capability and invest in the development of its employees’ strategic skills.

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