What’s the Story?

P&G and Unilever dominate the global CPG industry, with their products sold in virtually every grocery store and found in the majority of consumers’ homes. As part of Coresight Research’s Head-to-Head series, we provide insights into four key elements of the two businesses, covering revenue growth and segmentation, as well as both companies’ digital transformation initiatives, approaches to product development and varying growth strategies. Also known as fast-moving consumer goods (FMCG), CPG comprises products that are sold quickly and at a relatively low cost, such as beverages, packaged groceries and toiletries.

Why It Matters

The two global market leaders make for an insightful comparison—they have distinct outlooks on growth but indicate a common goal of improving their respective product offerings, notably in response to consumer demand changes amid the pandemic in 2020.

P&G vs. Unilever: A Deep Dive

Company Overviews Both founded in the 19th century, P&G and Unilever are leading players in the global consumer goods industry. The two companies offer a plethora of everyday products under multiple categories, from beauty to home goods.

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Figure 1. Company Overview [wpdatatable id=954 table_view=regular]

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Source: Company reports/S&P Capital IQ/Coresight Research 1. Revenue  From fiscal 2015 to 2020, both P&G and Unilever reported marginal revenue increases. In its fiscal 2020, P&G reported revenue of $71.0 billion while Unilever’s revenue reached $62.0 billion. P&G’s revenue grew at a very low CAGR of 0.06% from fiscal 2015 to 2020, whereas Unilever reported slightly better, albeit fairly marginal, revenue growth of 1.41% in the same period. P&G’s marginal revenue growth can be attributed to its move to divest around 41 of its lower-margin brands in 2016, to refine its focus on more significant brands. This led to a revenue decline of 7.7% during the year. From 2017 onward, the company has reported a low to mid-single-digit increase in its revenues. Although Unilever reported lower revenue than P&G, the former achieved a slightly better CAGR of 1.41% from 2015 to 2020. Unilever reported a 9.5% decline in revenues in 2018, which was largely on the back of the divestiture of its spreads business in 2017. The overall growth in Unilever’s revenue from 2015 to 2020, can be primarily attributed to consistent performance in its beauty and personal care segment over the five-year period.

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Figure 2. P&G and Unilever: Revenue 2015–2020 (USD Bil.) [caption id="attachment_127370" align="aligncenter" width="725"] Source: Company reports/S&P Capital IQ[/caption]   Revenue Segmentation by Product Category While P&G boasts multiple product categories, it is primarily focused on personal care products from diapers to soap to razors. Unilever operates in almost the same categories as P&G, but it also offers products in the food category. Unilever’s food and refreshment segment accounted for 37.7% of the company’s revenues in 2020.

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Figure 3. Revenue Segmentation, by Product Categories in 2020 (% Share of Revenue) [caption id="attachment_127371" align="aligncenter" width="725"] Note: Totals may not sum due to rounding
Source: Company reports/S&P Capital IQ [/caption]   Revenue Segmentation by Geography A notable geographic distinction between Unilever and P&G revenue segmentation is the former’s increased exposure in emerging markets and developing economies. We expect growing incomes and swiftly emerging middle classes in developing countries to fuel sales growth going forward. Moreover, increasing financial security is leading to an increase in purchasing power among consumers in emerging economies, which reflects favorably on Unilever’s revenue growth opportunities. Unilever generates a major share of its revenues, amounting to 46.2% in its fiscal 2020, in its AMET (Africa, Middle East and Turkey) and RUB (Russia, Ukraine, Belarus) regional clusters. Meanwhile, P&G generates its major revenue share in the US, amounting to 44.1% in fiscal 2020. Unilever reports that around 31.7% revenue share from its business in The Americas. Unilever’s home continent, Europe, accounts for the smallest regional share of the company’s revenue in 2020 at 22.1%. The US and China region account for the highest revenue share at P&G. During its first quarter of 2021, the company witnessed 16% year on year growth in the US and 12% growth in the Greater China region, with the rebound in China following the pandemic accelerating the company’s performance in the region.

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Figure 4. Revenue Segmentation, by Geography (% of Revenue in 2020) [caption id="attachment_127372" align="aligncenter" width="725"] Source: Company reports/S&P Capital IQ[/caption]   Unilever expects Argentina, Brazil and India to emerge as top growth markets in 2021 and beyond due to the company’s strong mass portfolio in the three markets—its Dove, Lux and Sunsilk brands, in particular, have a significant presence in each country. Figure 5 indicates strong opportunities in developing markets and emerging economies, as highlighted by the International Monetary Fund’s real GDP growth projections. Emerging markets and developing economies are set to outpace the world economy by 2022 and significantly surpass real GDP growth in advanced economies. 

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Figure 5. World Economic Outlook Real GDP Growth Projections (%) [caption id="attachment_127373" align="aligncenter" width="725"] Source: International Monetary Fund [/caption]   2. Digital Transformation Digital transformation is a top priority for P&G and Unilever. We discuss recent developments toward digitalization at both companies. Unilever has recently established two strategic partnerships within its digital transformation strategy. In 2019, Unilever partnered with Marsden Group on a customized digital twin solution that enabled the company to digitally replicate and analyze its entire manufacturing footprint for potential pain points. The solution leverages AI and machine learning algorithms to generate insights around process improvements and for predictive analysis. The insights enabled Unilever to:

• Optimize around 700 processes with RPA (robotic process automation) tools. Replacing these manual tasks with automated processes improved employee efficiency, freeing up time for important tasks that require human intervention.
• Enhance productivity by 3% compared to the prior year, with cost savings of €2.5 million ($2.8 million) in 2019 based on the implementation of RPA.

In December 2020, Unilever announced a strategic partnership with Dada Nexus Limited, a China-based on-demand retail and delivery platform, to develop a data-driven on-demand retail model. We believe this partnership will help Unilever to develop its regionally differentiated operations, expand into lower-tier cities and enhance its product management system. P&G is approaching the development of its digital capabilities through pilot initiatives aimed at transforming its services, including fulfillment and its e-commerce platform. The company has already built a digital network based on real-time demand signals that help the company to improve demand forecasts.

• In October 2020, the company announced plans to expedite digital transformation in its Singapore operations. It launched the iFuture digital capability program, through which it plans to train 50 employees to undertake new digital roles in P&G. By 2023, P&G plans to invest SG$50 million ($37.6 million) in the program.

3. Product Expansion: Gaining Market Share During Covid-19 P&G and Unilever innovate in product offerings to meet changing consumer demand. In 2020, the two companies responded to the spike in demand for cleaning and hygiene products amid the outbreak of Covid-19 with new product launches within these categories. For instance, P&G accelerated the launch of its new brand of antibacterial home cleaning products, Microban 24, at the offset of the pandemic in the US in March 2020. Moreover, Unilever launched its personal hygiene brand Lifebuoy across 50 new markets in 100 days, during its first quarter of 2020. This included a relaunch of the brand in the UK, with a £12 million ($16.7 million) marketing campaign in partnership with Uber. Unilever provided hygiene kits featuring its Lifebuoy products to drivers and courier providers in the UK, defining Lifebuoy as a key hand hygiene brand across the country. Unilever also launched various products across its brands in response to the health pandemic, focusing on increased interest in boosting immunity and eliminating bacteria, which we discuss below.

• In October 2020, Unilever’s Liquid I.V. brand introduced a new version of its drink mixtures marketed as improving immunity. Named Hydration Multiplier+ Immune Support, the product is available across US retailers including Amazon, Costco and Walmart, as well as on Liquid-IV.com.
• SmartyPants announced plans to expandits vitamin product assortment with a range of new supplements, named Healthy Immunity Daytime, Healthy Immunity Nighttime and Healthy Kids Immunity. The brand which was acquired by Unilever in December 2020, states that the supplements use a combination of clinically proven ingredients to support and build strong immune systems.
• Hindustan Unilever Limited (HUL) launched a new mouth wash formula in December 2020, named Pepsodent Germicheck Mouth Rinse Liquid. According to HUL, the new product uses cetylpyridinium chloride (CPC) technology to reduce the viral load of SARS-CoV-2, the virus that causes Covid-19, by 99.9%.

4. Growth Strategies The two companies take a varying approach to their growth strategies—while Unilever looks to acquisitions, P&G focuses on organic growth. As such, we identify two different trends among the two players in terms of M&A initiatives in 2019 and 2020. While Unilever acquired approximately 14 companies over the past two years, P&G acquired just one company. Moreover, P&G divested five businesses during the period as part of its broader move to sell off unprofitable or low-margin businesses to improve profitability. Since 2015, the company has reduced the number of brands from 170 to just 65 and reduced its product categories to 10 from 16, in order to retain top line growth. While Unilever has more than 400 brands, P&G is focusing on finding a smaller portfolio. Figure 6 and 7 explore the 2019 and 2020 M&A transactions undertaken by P&G and Unilever, respectively.

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Figure 6. P&G’s Acquisition and Divestment Activities: 2019–2020 [wpdatatable id=955 table_view=regular]

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Source: Company reports/Coresight Research The majority of Unilever’s acquisitions are concentrated on beauty and personal care products. Figure 7 highlights acquisitions completed by Unilever in 2019 and 2020.

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Figure 7. Unilever’s Acquisition Activities: 2019–2020 [wpdatatable id=956 table_view=regular]

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Source: Company reports/Coresight Research

What We Think

To retain their positions as market leaders in a highly competitive space, both P&G and Unilever should continue to innovate their product offerings to meet changing consumer preferences. Geographically, emerging markets remain the key driver of Unilever’s growth while P&G generates maximum revenue share from developed markets, such as the US.  Both companies are focusing on digitalization and strengthening e-commerce strategies to directly connect with billions of their customers. Amid the rising e-commerce trend, data aggregated from their customer bases will be central to both companies staying ahead of their competition.  We believe that Unilever will continue to grow its beauty and personal care segment primarily through strategic acquisitions. Changing dynamics in fashion trends and increased brand consciousness, as well as increasing disposable income in emerging economies, are leading to growth in the beauty and personal care market. P&G is looking to achieve growth with a more organic strategy that has seen the company move away from acquisitions and divest more than 110 of its brands since 2015, as well as refine its product categories to 10 from 16 to retain top line growth.