vision and strategy ar09

8/8/2019 Vision and Strategy AR09

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This PDF is a section o the Unilever Annual Report and Accounts 2009 provided to Unileversshareholders. It does not contain sufcient inormation to allow a ull understanding othe results o the Unilever Group and the state o aairs o Unilever N.V., Unilever PLC orthe Unilever Group. For urther inormation the Unilever Annual Report and Accounts 2009should be consulted.

Certain sections o the Unilever Annual Report and Accounts 2009 have been audited.These are on pages 79 to 128, 131 to 132 and those parts noted as audited within theDirectors Remuneration Report on pages 71 to 73.

The maintenance and integrity o the Unilever website is the responsibility o the Directors;the work carried out by the auditors does not involve consideration o these matters.Accordingly, the auditors accept no responsibility or any changes that may have occurredto the fnancial statements since they were initially placed on the website.

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Disclaimer Except where you are a shareholder, this material is provided or inormation

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The inormation is given as o the dates specifed, is not updated, and any orward-lookingstatements are made subject to the reservations specifed on the fnal page o the Report.

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We work to create a better uture every day.

We help people eel good, look good and get more out o lie withbrands and services that are good or them and good or others.

We will inspire people to take small, everyday actions that can addup to a big dierence or the world.

We will develop new ways o doing business with the aim o doublingthe size o our company while reducing our environmental impact.

Our vision


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Where we will win

Brands and innovation are at the heart o our business model. We aim to oer a broad portolio that appeals to consumers withdierent needs and budgets. Unilever brands must also oer product quality that is recognised as superior by our consumers andsupported by excellent marketing. Meanwhile, our innovation programme is ocused on being bigger, better, aster. This meansleveraging technology to create bigger, better innovation platorms that are then rolled out aster to multiple markets.

Our ambition is to win share and grow volume protably across our categories and countries and we believe we have the toolsin place to do so. We have a portolio t or growth, with strong brands and many leading category positions. Geographically, ouroutstanding presence in the emerging markets leaves us well positioned to win where much o the uture growth will be. Yet, we arealso determined to grow in the developed world, which represents around hal o our business and where the bulk o the worldswealth will remain or many years to come.

The biggest opportunity or Unilever and our customers lies in growing the size o our categories, which we will strive to achievethrough innovation and market development. We will urther enhance and broaden our relationship with customers workingtogether on areas o mutual benet such as consumer research, shopper behaviour and merchandising. To sustain winning customerrelationships and to enable growth, we will also need to be consistently brilliant at customer service and in-store execution.

We will aim to reinorce our continuous improvement philosophy by urther developing a customer and consumer-led, agile valuechain. Our ocus will be in three areas. We will prioritise speed and fexibility in the supply chain to deliver growth. Secondly we will

leverage our global network capabilities and scale more aggressively. Finally we will work to get a better return on our advertisingand promotional expenditure one o our most signicant areas o cost.

It is vital that we have the talent and organisation in place to match our growth ambition. Across the business, we are thereorelooking ahead at what we need to achieve, and aim to equip ourselves with the necessary people, skills and capabilities to get there.We also know that engagement and a culture based on living our values are essential or keeping the best people. We believeour operating ramework allows us to balance scale and global expertise to develop successul products with the local consumerintimacy needed to market and sell them.

Strategy With condence in our ability to grow we launched a renewed, bold visionor the company to double our size while improving our environmentalootprint. With our portolio o brands, presence in emerging marketsand long-standing commitment to shared value creation, we believe your

company is well placed to deliver on this ambition.

Winning with brands and innovation

Growth priorities

Winning through continuous improvement

Winning in the market place

Winning with people

How we will win

More on p8

More on p10

More on p12

More on p14

Unilever Annual Report and Accounts 2009 7


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Report o the Directors Our strategy

Winning with brandsand innovation

How we will win

Superior productsOur aim is to give people a great experience when they useour brands better than the competition. We are investing inimproving product quality and making stronger unctional

claims. We are also ocusing on design, packaging, marketingand advertising, in order to get our brand benets acrossmore persuasively.

Take Knorr Stockpot bouillon. Using a unique jelly technologythat delivers homemade taste and quality, this product is helping

people create a special meal at home instead o eating out. Amajor success in the UK where it enabled Knorr to become

market leader in stocks, Stockpot (marketed under dierentnames in dierent countries) is also perorming well in Belgium,Greece, Ireland and Poland. It helped create the bouillon categoryin China and we are now rolling it out to other markets.

Widespread appealProduct superiority is essential, but we also need to oer a broadrange o choice which meets diering consumer needs and price

points wherever we operate.

Brands and innovation are at the heart oeverything we do. We develop our products tokeep pace with changes in consumer liestylesand to appeal to people at all income levels.Success means getting bigger and betterinnovations into the market aster, supportedby the very best marketing.

In the UK, understanding that consumers are looking or value

without compromising on quality, and recognising the importanceo ragrance in communicating a products benets, wedeveloped a range o liquid concentrates or Sur detergent

with added essential oils, resulting in 29% growth.

In Russia, despite a severe economic recession, we achieved

growth o more than 20% in our tea sales by oering choiceacross multiple price points with three distinctive brands Lipton, Brooke Bond and Beseda.

And in India, where water quality remains a major concern,the breakthrough technology o Pureit, our in-home puricationsystem, is providing sae and aordable drinking water with

complete protection rom the water-borne germs that causediseases. In 2009, Pureit provided sae drinking water or morethan 15 million people in 3 million households in India.

An invention by our R&D team has achieved whathas previously been impossible: to produce a low-atmargarine that does not spit or burn when you useit or rying. Launched in Europe in 2008, our lightliquid margarines rom our Family Goodness and HeartHealth brands are oering consumers a new way to cooklighter meals. Made o a combination o three vegetableoils, and including the important vitamins A, D and E,they make it easy to cook nutritiously or the wholeamily. And it hasnt gone unnoticed by consumers.Liquid margarine is the astest growing segment in our

European spreads and cooking category, and our newlight liquid exceeded expectations, bringing new usersto the segment and our brands in both the Netherlandsand Belgium.

Case study: Liquid margarine

Low-at rying?

I youve ever tried rying with low-atmargarine, youll know why people useull-at instead, and try to reduce theircalorie intake by using less o it. Spittingand burning, low-at oils can oten letyou down. Until now, that is.

and more @ www.unilever.com/blueband

8 Unilever Annual Report and Accounts 2009


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Bigger, better, aster innovationsSuccessul innovation is based on deep consumer insight. Thebalance we seek to achieve is to marry global strength in R&Dwith local knowledge o peoples habits, tastes and behaviours.

To grow at the rate we want to, we ocus investment on products

that can work globally rather than on launches in just a ewcountries. We have also doubled the number o big projects weare working on. We are already seeing results. We have rolled outAxe Dark Temptation deodorant to 56 markets, Lipton Pyramid

ruit tea bags to 38 markets and Clear shampoo to 35 markets.

For a product to work at a global level, it needs to address unmet

needs with superior technology and a clear consumer concept.R&D must deliver breakthrough science in areas that really matterto consumers, with products that do what they claim. Success

on this scale requires strict priorities and big ideas.

Within R&D, part o prioritising is getting the balance rightbetween the short and the long term. With an eye to our uture

growth plans, during 2009 we developed a more robust processor uelling our longer-term innovation pipeline. Called the GenesisProgramme, it spans our oods and home and personal care

categories and ocuses on the breakthrough ideas that we expect

will deliver the biggest wins. From 2011 we should begin to seesome o these innovations in our products.

We continued to invest substantially in R&D, despite the economicenvironment. In 2009, we opened a new R&D centre in Shanghai.

Located in a country which is increasingly recognised as a worldleader in developing high-end innovations, the new centre urtherunderscores our commitment to driving growth through R&D. We

also started to leverage the power o our global network o R&Dlabs by getting them working interdependently on key projects.We put in place more rigorous planning processes to make sure

that the right level and quality o resource is put behind theactivities to ensure the projects succeed. And we have stepped up

our ocus on a number o areas identied as critical to successsuch as open innovation, clinicals and patents.

In 2009 we launched new Dove Body Wash with proprietaryNutriumMoisture technology. It intertwines mild cleansers withnatural moisturisers helping maintain the skins natural moisturebarrier, earning the product its scientically-proven claim toprovide eective natural nourishment. Supporting the science,the advertising campaign gave consumers an image to remember: aully-clothed woman in the shower, bringing to lie how conventionalproducts use moisturisers that tend to sit on the skin compared withDove Body Wash with its penetrating moisturisation. And with itsstreamlined tear-drop packaging, less waste means the environmentbenets too. Having proved its potential in the tough US market,Dove Body Wash will be rolled out elsewhere in 2010.

Case study: Dove

Getting underyour skin

Body wash is a competitive market. Everyoneis seeking that perect combination: genuinecleansing without drying out your skin. TheNutriumMoisture technology in Dove contains

100% natural moisturisers that are absorbedthoroughly to nourish the skin deep down.

Bigger, better, asterIn laying the oundations orgrowth, we are ocusing onrolling out more innovationsaster and to more markets.

and more @ www.unilever.com/dove



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Lead market developmentThe worlds population, currently 6.8 billion, is set to grow to7.7 billion by 2020. Today, 5.9 billion live in developing and emergingmarkets countries such as Brazil, India and Indonesia where

Unilever has deep roots and a wide presence. We already reachmany more consumers than our competitors in these markets.

Market development is about developing and growing categories.There are three ways o doing this: more users (increasing market penetration);

more usage (increasing consumption); more benets (getting consumers to buy higher value products).

Take Axe. In recognising that ragrance is a major reason whypeople choose one brand over another, new ragrance launchesare helping to increase market penetration, introduce new users

to the brand and ensure our product mix remains up to date.This, in turn, has helped Axe become the worlds leading maledeodorant and shower gel.

Putting market development into practice requires a rigorous,consistent approach across all our categories. During 2009

our global category development teams produced marketdevelopment models or every category. These models are now

with our country teams who are using them as the basis o plansor their local markets. This approach has already shown excellentresults in many o the markets in which we operate.

Winning in themarket place


Our biggest growth opportunity lies in expandingthe markets in which we compete. In developingand emerging countries there is huge potentialor uture growth as more and more people startconsuming personal and household productsor the rst time. To realise this potential, we willneed to partner with our customers in both thedeveloped and developing markets.

How we will win

Unilever was the exclusive partner o Walmart Soundcheck.The campaign eatured music talent such as Jennier Hudson andMartina McBride. Our brands, including Dove and Suave, wereable to reach their target consumers in a new, innovative way.A video o a latest hit, along with exclusive interviews with theartist, was shown in-store in the electronics department, andwas available as a download rom the Walmart website. In-store

merchandising and additional online programming urtheramplied the campaign. Not only did the programme result ina big increase in sales or our products, but Walmart saw a risein music sales o the eatured artists. Soundcheck is a multi-yearexclusive partnership, so were looking or another good yearin 2010.

Case study: Walmart USA

Winning in Walmart

Using hit album releases to sell our personal care products? TheSoundcheck campaign with Walmart engaged top artists whoseimages reinorce our brands. With continuous exposure in almost

every Walmart store, the campaign reached around 130 milliontarget consumers per week, making a huge contribution to our6.8% uplit in sales in Walmart in 2009.

and more @ www.unileverusa.com/suave



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Win with winning customersThere is a growing trend in the retail industry towards consolidation,with ewer but larger retailers. Thanks to our global scale andlocal knowledge, Unilever is ideally placed to help those customers

achieve their own growth ambitions.

In 2008 we opened in New Jersey the rst of a network of

customer insight and innovation centres to work directly withretailers. The centre covers everything rom merchandising and

store layout, to displays and packaging. Through the centre,we work with customers to design and test concepts withoutgoing to the expense o real in-store pilots. Since opening,the centre has generated signicant growth opportunities. Our

London centre has since opened and we plan to open threemore in 2010 in Paris, Shanghai and So Paulo.

Be an execution powerhouseMarket development and great relationships with customerswill only be points o advantage i we execute with excellence.

This is not a complicated concept. It is about the everydaydisciplines o ensuring that we are delivering to our customersthe products they want, in the quantities they ordered at the

time they are needed. This involves having a customer-ocusedapproach across our brand building, customer developmentand supply chain teams.

During 2009 we ocused much more closely on salesundamentals, a set o company-wide measures covering every

aspect o our in-store presence. We have perormed well againstthese measures, which have been one o the many drivers inimproving customer service in most o our key countries.

The detail o what works in one type o store wont workor all, however. A superstore in the US is very dierent rom

a local retailer in a small town in China, both in terms o the

products it carries and the way those products are sold. But oreach type o store, by channel and geography, there is a perect

concept namely, what the shop would look like i it were theperect sales vehicle or our categories and brands.

We developed the perect store concept in the AAC region(Asia, Arica and Central & Eastern Europe) in early 2009. Webegan implementing it in modern trade outlets across the region,

ocusing on the regions largest our categories skin cleansing,hair, abric cleaning and tea. In some smaller outlets, we evensucceeded in executing the transormation overnight, takingthe competition by surprise and maximising the impact o

the change.

Over the next ew years our aim is to continue implementing

the perect store concept across the AAC region, while in thecoming year, the concept is being rolled out around the business.

In developing and emerging markets, most people still make tea rom loose leaves. Thereis a huge opportunity to convert consumers to tea bags and, as the worlds largest tea brand,Lipton is well placed to lead this development. In 2009, helped also by innovations in ruitteas, Lipton grew by 7.4% across the world. With many markets only just beginning to wakeup to tea bags, we believe there is plenty o opportunity or urther growth.

and more @ www.unilever.com/lipton

Case study: Lipton

Trading up with the worldsmost popular tea brand

Increasing the value o Lipton, the worlds most populartea brand, is all about conversion partly conversionrom some other drink to tea, but also rom loose-leatea up the value chain through dierent typeso tea bags.

Coee ice cream dreamUnilever is gaining momentumin the North American icecream market with apartnership to produce anown-brand super-premiumice cream or Starbucks.



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Fast and fexible and increasingly competitive

Winning in the market is about being ast and agile to meet thechanging needs o todays customers and consumers. O course,being competitive on cost is vital, but rather than having a purely

cost-based agenda or our supply chain, we have widened ourocus to ensure that we are more responsive to the constantlychanging needs o our customers.

Delivering signicant valueDuring 2009 we launched a single strategy or the supply chain

One Unilever Supply Chain putting customers and consumersat the heart o everything we do. The principal objectives or oursupply chain are to deliver top-quality products with world-class

service at a competitive cost. Its a big ambition that: supports top-line growth through speeding up the roll-out

o global launches; ensures our products are constantly on the shelf; increases prots by simplifying our structure and

reducing waste;

improves cash ow by reducing stock and providingbetter payment terms.

The rewards are signicant. In 2009, as part o this, ourOne Unilever Supply Chain team contributed signicantly todelivering 1.4 billion in savings.

The advantages o global scaleUnilever has a global reach wider than many o its competitors.

This gives us a tremendous opportunity or improving ecienciesby leveraging our scale. We are doing this in three critical areas: procurement;

manufacturing; back ofce services.

Single procurement strategyHaving a single, global procurement strategy means that wherebigger is better, we are getting the benets. For many items, buying

globally gives us economies o scale. For example, signicantlyreducing the number o tomato ingredients that are used in ourproducts rom 300 to just 39 enhanced the consistency o product

quality and, at the same time, substantially reduced costs.

Winning throughcontinuous improvement


Delivering sustained, protable growth requires a philosophyo continuous improvement. This means being ast and fexiblein the supply chain while keeping costs competitive. It will alsorequire us to make the most o our scale and aim or the bestreturn on every euro we spend on advertising and promotion.

How we will win

and more @ www.unilever.com/axe

Introduced at our UK plant in Leeds, the new

technology allows us to produce a common,unperumed base or our aerosols, adding theragrance only at the very last stage. This gives usthe fexibility to make many more variants withoutincurring higher costs. Its good or us because it hascontributed greatly to lower stock levels; around 70%o our stock-keeping units have seen their minimumorder quantity halved; our product change-overtime has reduced rom 40 minutes to just our; andwe produce less waste. But more importantly itbenets customers, who have improved shel stocklevels and reduced lead times, and consumers,who can get a wider choice o ragrance at noextra cost.

Case study: Deodorant

Wider range at no extra cost

Scent tends to be the main reason wechoose a particular deodorant so a widerrange o ragrances is going to attract moreconsumers. But a wider range typicallyequals higher costs. Or does it? The trade-obetween range and cost just got a whole lotbetter or us, our customers and consumerswith our new late variant technology.



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Regional sourcing operations

In manuacturing, we believe that most o the economies o scaleare to be ound at the regional level. To capture these, we arecreating three regional sourcing companies. These are located in

Singapore and Switzerland, where the Americas sourcing companywill co-locate with the European company.

Internal services under one rooEven with activities such as IT, travel, oce services, accountspayable and accounts receivable, there are big opportunities to

leverage global scale. So in 2009 we set up a new business unit,Unilever Enterprise Support (UES). It will be operational in April2010 and will bring together many o these activities as a key parto our initiatives to drive down costs.

The best return on brand and customer investmentUnilever is the second biggest advertiser in the world. Improving

the return on our brand and customer support is one o thebiggest things we can do to achieve growth.

There is a tendency to think that analysing this kind o returnon investment is some orm o mystery. We believe it is simplyabout being rigorous in applying our best evaluation and

development techniques.

Everyday disciplines done brilliantlyFirst, we decide on the best ways o investing our spend. We do

this on three levels: allocating investment across geographies, categories

and brands; allocating investment across particular projects and

product launches;

allocating spend locally across marketing channelsand promotions.

Beore we invest, we use a number o tools to answer the questions:how much should we be investing; and how can we maximise itseectiveness? During and ater the investment, we use other tools

to look at whether it is working, how it could work better andwhat to do next. This is not about replacing creativity with analyticsand measurement; it is about doing both brilliantly.

Through ocusing on these basics, we are already seeing greatimprovements in return on investment in a number o areas. For

example, our US oods business has increased returns by over 45%in six years, helped by its use o econometric modelling.

Future trends

Looking ahead, there are two big themes that will dominate our

media planning: how we make best use o digital media and, giventhe rise in prominence o global retailers, how we can make the

most o in-store investments.

From months to weeks at no extra costThrough a partnership with major suppliers,US personal care product labelling is now keepingpace with brand design and variant changes.Process optimisations have created shorterprint runs, quicker turnarounds and less waste,at the same label cost.

and more @ www.unilever.com/supplychain

With such an opportunity or making eciencies, we set upUltraLogistik as a separate transport management division withinUnilevers supply chain. It is managed rom hubs in Poland andSwitzerland, by a team o 100 specialist transport managers. For eachtransport route we reviewed the arrangements and determined whicho them should be moved into UltraLogistik, and then tendered eachroute to get the best deal. We are already making savings o at least15%, as well as cutting down carbon emissions by moving transport o

the road. Ultimately, our aim is to bring over 50% o European transportmanagement within UltraLogistik, and to roll out the model to otherparts o Unilever.

Case study: UltraLogistik

Major savingson logistics

In Europe, we spend a signicantamount every year on transport. Thatsrom suppliers actories to our actories,rom our actories to our distributioncentres and rom there to our customers.And, until 2008, it was all outsourcedand managed locally, using hundredso dierent distributors.



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Our operating ramework seeks to combine global scale, powerand strength with local consumer intimacy. Taking advantage othis in all our chosen markets and categories as we are already

doing in many areas will be critical in ensuring our success.

To do this we need to have a team capable o delivering, and to

oer the career potential and working environment that makeUnilever the best place to be.

Developing a team t or growthSome o our major markets are doubling in size every ve tosix years, while our own growth ambitions mean that having

enough people with the right skills is a challenge in itsel. Gettingthe right number and quality o people in the pipeline or theuture does not happen by accident. It requires an understandingo what is already in the business that can be built upon, and

what will be needed in the uture as markets develop.

In 2009 we launched our talent and organisation readinessprogramme, which will do just what it says: make sure our

organisation and our talent are ready or growth. We areassessing those areas o the business most crucial to our strategyto dene their specic goals, and whether we have the structure

and the talent to deliver them. Where we identiy gaps,we ocus on developing targeted solutions. This may involveone or more o the ollowing:

changing organisational structures; revising our recruitment strategy and approach;

reviewing our retention schemes; improving core processes such as decision making; focusing on culture and employee engagement;

using development and training programmes to buildcapability levels.

So ar we have carried out our pilot programmes in China,Indonesia and Germany, and in our skin category. These havegiven us important new insights.

Winningwith people


Doubling in size is a challenging prospect. From atalent and organisational perspective, it cannot bebusiness as usual. We will have to have in placethe people and structures necessary to manageon a larger scale.

How we will win

and more on people development@ www.unilever.com/careers

Filling the skills gap by getting our people upto speed as quickly as possible became essential. Within three months we developed a trainingprogramme with our HR providers, Accenture,and trained over 450 sales sta in seven citiesacross China. The average pass rate was over95%, and we are already seeing results with anoverall increase o 2.29% in net invoice valuedelivered by those who did the training. We havenow picked some people to become trainers

themselves so the programme can becomesel-sustaining. We are also looking at rolling itout to other emerging markets where our salespeople need to develop new skills quickly.

Case study: China

Gettingresults ast

Our business in China isgrowing and relationshipswith customers and largethird-party distributors arebecoming increasinglyimportant. Our sales teamis key to driving growththrough both. We identied

areas where improvedindividual perormance wouldlead to signicant returns orthe whole business.



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A diverse team or the widest range o consumers

An important part o developing the Unileverworkorce o the uture is diversity. We needa diverse team across gender, nationality, race,

creed, culture to be able to connect with thewidest range o consumers and to take ourperormance to a higher level.

We are already making progress. Our Board oDirectors comprises six nationalities and the nine

members o the Unilever Executive team comerom six dierent countries. This combinationdelivers a wealth o experience in emergingmarkets which is critical to our uture

business success.

In terms o gender, the number o women in

senior positions has increased. For example, the proportiono women now at vice president level has gone up by aroundone third since 2007. For more on diversity, see page 28.

A place to succeedAs important as development programmes and organisational

structures is having a perormance culture that rewards people

and teams who deliver. Only by inspiring our people andmotivating them to succeed will we deliver our growth ambition.

People, integrity and values have always been central toUnilever, and will continue to be so. But within that context

we are determined to become aster, more ocused and morecompetitive. In 2009 we updated some o our perormancemanagement tools, or example introducing a global perormance

and talent management system.

Measuring cultural change is an inexact science, but we put

great eort into engaging with employees to nd out whetherthey understand the companys vision and their role within it,

what their views are about Unilever, and what they believeneeds to change or us to achieve our ambitions. In 2009 webegan an employee engagement programme that will ensureemployees are involved in Unilevers vision and plans or

the uture.

and more @ www.unilever.com/WFP

As part o Unilevers partnership with the World Food Programme(WFP), 12 student interns are recruited each year to help run WFPs schooleeding programme in developing countries. It isnt just the local childrenwho benet, or the students, who learn valuable lie skills. While thereis no requirement or interns to talk about Unilever, it is inevitable thatthey will when telling their riends about their experiences and mosto the time it is positive. In todays world o blogging and texting, thereis no better way to spread the word.

Case study: World Food Programme

Judged byour actions

Competing or the best graduates isa tough job in todays market. Otenthey demand to know more abouta companys social and environmental

impact on the world. On campus,companies bombard graduates withmessages about how ethical they are.But how many really do more thanwrite a cheque each year?

Shes got the loveMarmite brand managerCheryl Calverley scoopedthe Marketing SocietysYoung Marketer o theYear award in the UK orher success in re-engagingthe love it or hate it brand

with young consumers.

vision and strategy ar09

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