#3 Unilever: Pruning the portfolio

Even by the standards of mega-food companies, Unilever is extraordinarily diverse, with a product portfolio that ranges from ice cream to powdered soup. (And food represents only a little more than half the company’s total revenue; it also has a substantial business in personal care products.)

Unilever reported $27.9 billion in food sales in 2007, an increase of 18% over 2006 and enough to vault into third place in Food & Beverage Packaging’s list of top food companies. The weak dollar no doubt helped, but Unilever has been posting healthy margins for years: 13% or above in each of the last three years. The stock price has been healthy, too: up from the mid- to high twenties per share in 2006 to about $33 today.

That’s not to say the company hasn’t had its troubles. Over the last few years, Unilever has been edging out of the frozen-food business in Europe. It sold its Spanish frozen-food business to Bonduelle in 2006, and the majority of its Western European business for more than $2.2 billion the same year. Other food segments got divested, too: It announced plans to sell its spice business, which includes the Lawry’s and Adolph’s brands, to McCormick & Co. for $605 million. This year it sold its French cheese business, Boursin.

These moves come as part of a general drive, announced several years ago, to aggressively prune the huge Unilever product portfolio of underperforming brands. Unilever also is in the midst of a stringent cost-cutting drive. In mid-2007, the company began planning to cut its payroll by more than 20,000 employees worldwide.

Price and sustainability
As one of the world’s biggest food companies, Unilever has found itself squarely in the middle of the two biggest issues facing the industry today: prices and sustainability. Last year was the ninth year in a row that the company has topped the Dow Jones Sustainability Index, a comprehensive measurement of corporations’ commitment to general health and environmentally sound strategy. Among the company initiatives cited was the launch, in 2006, of Choices, a stamp on the front labels of various Unilever products indicating that they meet international guidelines for trans fats, saturated fat, salt and sugar.

Packaging features squarely in other aspects of Unilever’s sustainability drive. Unilever recently instituted a series of initiatives to cut packaging use, including:

• eliminating an outer carton from Knorr vegetable mix and creating a new shipping and display box, reducing secondary packaging by half;

• reducing the packaging height on Bertolli frozen meal pouches and their shipping boxes, leading to savings of 5.3% on flexible packaging and 8.6% on corrugated material;

• reducing the width of Lipton soup cartons, cutting material use by 15.6%; and

• redesigning the Knorr Recipe Secrets soup pouch to eliminate the outer carton.

Unilever also is in the forefront of the controversy over whether, and how much, the drive for biofuels is pushing up worldwide food prices. The company, like most of the rest of the food industry, comes down squarely against most currently commercial biofuels: “Unilever believes that first generation biofuels are neither environmentally efficient nor cost-effective ways to reduce GHG [greenhouse gas] emissions,” it said in a statement.

One of the more noteworthy new Unilever packages introduced this year is a simple concept: Take Ragú, Unilever’s well-established line of spaghetti sauce, and put it in a single-serve pouch. The 13.5-ounce Ragú Fresh & Simple pouch features a clear bottom gusset that allows consumers to view the product. Consumers clip open one corner of the pouch, microwave it for about a minute and a half, and hold it by the other corner to pour onto pasta.  F&BP