Fast-Moving Consumer Goods leader Unilever hosted its Annual Investor Seminar on November 30, 2016. Here are our five key takeaways from the presentation.

1) UNILEVER TO FOCUS ON CORE, HIGH-GROWTH PORTFOLIO AND INCREASE CORE OPERATING MARGIN BY 40-80 BPS BETWEEN 2017 AND 2019

CFO Graeme Pitkethly outlined Unilever’s strategic agenda for the next fiscal year, and this focuses on driving sales, reducing costs and growing the operating margin by 40-80 basis points each year between 2017 and 2019 (from current annual margin growth of 20-40 basis points). Unilever plans to increase sales in three ways:

• By increasing penetration of high-frequency ranges—i.e., those products bought most often.
• By strengthening the company’s core portfolio of products in high-growth segments such as beverage capsules and men’s grooming.
• By having fewer variants and offering more channel-specific packs and sizes.

To reduce costs and grow its core operating margin, Unilever has deployed zero-based budgeting. Pitkethly noted that this approach has resulted in over €1 billion of cost savings for Unilever, through better visibility and higher accountability across functions and segments. Many of these cost savings have been in the marketing function and in general overheads. For example, the company helped cut marketing costs by setting up an in-house studio to create content. Unilever has also made cumulative investments of about €5.0 billion over the last six years to improve its IT infrastructure and supply chain. It plans to expand its cost-saving focus to these functions from previously being focused on marketing and general overheads.

2) UNILEVER TO FOCUS ON EVOLVING ITS PORTFOLIO AND DEVELOPING THE CHANNELS THROUGH WHICH IT REACHES ITS CUSTOMERS

Unilever aims to evolve its current product portfolio to include a more diverse range of products and it expects to spend between €1 billion and €3 billion per annum on acquisitions till 2019. It undertook a number of acquisitions over the last year, such as Dermalogica, Seventh Generation, Dollar Shave Club and Blueair. Acquisitions will help the company capitalize on faster-growing, higher-margin segments. They will also provide the company with new channels to reach customers directly. The company expects to reach more customers by developing partnerships with online players. Unilever has been working closely with Alibaba Group since 2010 and this partnership has helped it gain over one million new franchisees. One of the tools that helped it reach deeper, remote regions of rural China is through Alibaba’s Taobao Villages program, which brings together clusters of villages and sellers on its online marketplace.

3) MILLENNIAL CONSUMERS’ FOCUS ON HEALTH, WELLNESS AND VEGETARIANISM A KEY TREND FOR UNILEVER’S FOOD SEGMENT

Amanda Sourry, President of the Foods segment, and Kevin Havelock, President of Refreshments, both emphasized that there is a growing awareness of health, awareness and vegetarianism, which Unilever has considered in its forthcoming product development strategies. To this end and in keeping with the zero-based budgeting approach, it has partnered with an agritech university to work on better products. It has also partnered with the European Vegetarian Union to create a scalable plan for its business and create more vegan products. While there is an awareness of health and wellness, there is also a demand for flexi-eating or consuming food on-the-move. This is another key macro trend driving the food and refreshment segment that has pushed them to develop newer product formats.

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4) STRONG DEMAND ANTICIPATED FROM TWO CONSUMER CATEGORIES IN PERSONAL CARE: MEN AND MUSLIM CONSUMERS

Alan Jope, President of Personal Care, noted that men and Muslim consumers are two high-growth consumer segments for this category. He noted that men’s grooming was a €3 billion business for Unilever, with nearly €0.5 billion coming in from its Dove Men+Care brand, even before it acquired the Dollar Shave Club. He noted that the company anticipates this will grow further, and the acquisition of the Dollar Shave Club has provided it with an opportunity for cross-category expansion and to reach the consumer directly through the subscription model. Jope stated that the number of middle-class Muslim consumers is set to triple by 2030, and that Unilever already has a strong presence in most Muslim markets. He said that the company plans to create products more suitable to the climatic conditions in the geographies where these consumers are present, mainly the Middle East and parts of Southeast Asia. Unilever also intends to increase its marketing and promotion to consumers in these areas, to push further into the market.

5) SUSTAINABILITY AN IMPORTANT FOCUS IN PRODUCT DEVELOPMENT

Sustainability in the supply chain is an important focus across all segments at Unilever, and the heads of the segments outlined some of the initiatives undertaken by them. Sourry noted that Unilever has undertaken a commitment to source all food only from sustainable sources. Havelock added that some of the tea plantations are owned by Unilever, and it is working with suppliers to improve the ways the product is sourced. Nitin Paranjpe, President of the Home Care segment, noted that Unilever has developed a fabric conditioner that involves using less water for regions that have a scarcity of water. Another sustainability initiative it has undertaken is to identify ways to reduce packaging, the costs involved in it and the waste that results from packaging material.