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Unilever: Providing Enjoyable and Meaningful Life to Customers

Jeannifer Filly Sumayku | The President Post

unileverproductsUnilever is a multinational company that needs no introduction. This huge consumer goods enterprise has established its presence in various countries, including Indonesia. Its products from Europe have penetrated not only urban communities, but also rural areas across Indonesia.

Unilever’s success does not come automatically. It is the result of long years of commitment to the business philosophy and core values laid down by its founders.

The multinational giant came into being following the merger of two competitors which used to be hostile to one another—Margarine Unie and Lever Brothers.

One of its business leaders and smart marketers worth remembering is William Hesketh Lever. He was known as a hard-working, innovative, and skilled marketer who formulated the foundation of what is now a proud symbol of success in global consumer goods business.

Born in Wood Street, Bolton, England, on Sept 19, 1851, William was raised in a family of seven children and learned to do business from his parents.

William’s first job was relatively trivial—producing cutters and soap bars. From morning till evening he worked hard in return for £7.

He became his father’s business partner until 1872, the same year he began producing Lever’s Pure Honey soap, which led him to become a soap manufacturer. Unexpectedly, the soap sold well, as purchase orders streamed in from every direction.

Knowing that prospects of the soap market were bright, William went on to mass-produce the soap in a smaller package.

The soap was manufactured at Warrington factory in 1884 through a partnership with William Hough Watson, an alchemist.

The soap was named Sunlight, which used natural raw materials of vegetable oil while other soap products used animal fats.

The sales of this soap were amazing. In the span of three years, the factory managed to produce 250 tons of such soap per week and sold 40,000 tons of it every year.

After that, he moved the factory to the suburb of Liverpool in Wirral area, a small village that swiftly transformed itself into an industrial centerlater known as Port Sunlight.

William managed to run the industry which provided field jobs to many people. This way he nurtured the local community’s sense of belonging. They began to feel as if they owned the  factory.

By 1887, Sunlight had penetrated Europe, America and Africa. Through this soap, the British Empire reaped many benefits.

Five years later, the soap attracted the American market, and Lever Brothers were able to retain a handsome market share in America.

After having penetrated many countries with this soap, William developed two more brands of soap—Lifebuoy and Lux Flakes.

By this time he had already started to produce canned foods, processed fish, sauces, and ice cream.

His fame and that of the products he was associated with paved the way for his canned food business to be accepted widely in the market. Sales figures soared and the products remained in many people’s hearts.

During World War I, Lever Brothers, which was then based in London, approached Margarine Unie Company based in Rotterdam, The Netherlands, and merged with it because they produced similar consumer goods.

This merger gave birth to a new company called Unilever as of January 1, 1930. Following the merger, Unilever maintained two headquarters—one in London and the other in Rotterdam.

As a result of the merger, it had a larger amount of profit and dividends as well. And with this Unilever felt much stronger to expand its wings across the globe.

But soon Unilever discovered that it was not alone in the business, as Procter & Gamble (P&G) emerged as a strong competitor it should not ignore.

After the acquisition of Thomas Hedley Ltd and penetration into the British market in 1930, Procter & Gamble emerged as a tough competitor and a key actor in business that Unilever could not underestimate.

This competition encouraged William to chart further innovative ideas; he produced shampoo products, liquid soaps, and detergents. Its margarine was enriched with nutritional products in the form of vitamin A and D.

Such innovation put on hold the expansion of Procter & Gamble, giving Unilever an upper hand to become a market leader in Europe and the Americas.

In fact, during World War II, the armies from Europe and the United States got their logistic supplies from Unilever.

Apart from William, another key trendsetter that played an important role in instilling the values of Unilever was Countway, who promoted Lux Soapflakes as a soap that does not harm cotton-based clothing and silk.

Countway’s marketing strategy led to a sharp increase in the sales of Lux bathing and toilet soaps as well as Rinso detergent.

Both William and Countway advocated the importance of large-scale promotion and advertising, a strategy that is retained even to date by Unilever offices across the globe.

Unilever is known as one of the big-spending advertisers in any country to date because it believes that promotion through mass media advertising is the right way to bring the product message directly into the hearts of the customers.

After World War II, there was a “consumer boom” in the sense that many people began to purchase consumer goods in large scale across Europe.

This new tradition aroused Unilever’s awareness that it should focus on enhancement of technology in order to strengthen customer satisfaction.

Port Sunlight was made the center of research and product development. Since then Unilever has expanded to many countries, including Indonesia.

PT Unilever Indonesia, which later became a publicly-listed choice of portfolio investors, was established on 5 December 1933 as Lever’s Zeepfabrieken N.V. by decree No. 23 of Mr. A.H. van Ophuijsen, a public notary in Batavia (now Jakarta), and approved by the then Governor-General of Dutch-Indies.

By decree No. 92 of public notary Mr. Mudofir Hadi SH dated June 30, 1997, the Company’s name was changed to PT Unilever Indonesia Tbk.

The company offered its shares to the public in 1981 and since January 11, 1982, it is registered at the Jakarta Stock Exchange (now Indonesia Stock Exchange) under the initial of UNVR.

At the company’s Annual General Meeting on June 24, 2003, the shareholders agreed on a stock split, reducing the par value per share from Rp100 per share to Rp10 per share.

At the end of 2008, UNVR ranked third in the Indonesia Stock Exchange in terms of market capitalization.

Unilever owns eight main factories in Jababeka Industrial Estate, Cikarang, West Java, and Rungkut Industrial Estate, Surabaya, East Java, with its head office in Jakarta.

The company’s products comprise at least 30 key brands sold through a network of about 400 independent distributors and hundreds of thousands of outlets throughout Indonesia.

Products are distributed through central distribution centers, satellite warehouses, depots and other facilities.

Based on Unilever’s Annual Report of 2008, the HPC (Home and Personal Care) business grew at 21.1% (in 2007 it was 10.8%) and contribution from foods and ice cream businesses saw accelerated growth to 35.1% (it was 19% in 2007).

The strong growth in net profit for the year was attained against a background of cost increases in many raw and packing materials due to higher global prices in oil, chemicals and other commodities.

The net cash flow from operating activities was Rp2,786 billion in 2008, up from Rp2,250 billion in 2007. It invested Rp1,005 billion in capital expenditure in 2008, in part for expansion of factory operations to meet rising demand. But in 2008 it also completed construction of the largest skin care factory in Asia at Cikarang, and invested in a new SAP enterprise resource planning system across all their sites.

Dividend payments remained high with a total of Rp1,999 billion in 2008, an increase of 21.9% from 2007.

With an eye to the investment needs to support its growth, Unilever has remained committed a high dividend payout policy in the foreseeable future.

Based on CLSA prediction, Unilever’s income for 2010 will increase by 16.02% to Rp21.22 trillion—up from Rp18.28 trillion in 2009.

Net profit will also increase 18.12% to Rp4.19 trillion from Rp3.55 trillion in 2009.

As of 23 February 2010, UNVR stock at thye Indonesian Stock Exchange was strong enough, closing at Rp1,700 per share.

The stock was transacted 488 times with a total volume of 1,823,500 stocks worth Rp21.1 billion. In 2008, Unilever’s worldwide turnover was €40.5 billion. The company employs around 174,000 people in around 100 countries worldwide.

Unilever’s success cannot be separated from the solid values that William had implanted many years ago.

One of his strategies is to build good brand image. This is why Unilever gives high priority to brand imaging of its products rather than popularizing the name Unilever itself.

A network of distributors all over the world also contributes to Unilever’s strength and market leadership.

All over the world Unilever aims to create a clean environment to live in; reduce women’s workload; improve people’s health and personal charm; and promote a life that is more enjoyable and meaningful for its customers. All these values can be summarized in one word: vitality.

(The President Post printed edition April 11, 2010)

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