Unilever

This is a proposal of marketing search project that is conducted by group A. Ben & Jerry is chosen as our search target company. In the first part of this proposal, you can find detailed background information of Ben & Jerry, which gives a rough description of its four “P” (price, promotion, place and people). In addition, it also covers several issues about the European ice cream market. The next part of this proposal is mainly discussing marketing management problems.

You can find out Ben & Jerry‘s symptoms, suspected causes of its marketing management problems, Ben& Jerry’s actions and its consequences. Besides that, we listed several questions to help us analyze customers’ buying behavior and the main methods we will used in order to finish our survey. The schedule and sampling plan will give you a full picture of our project progress. Ben & Jerry’s Market Research Background Proposal 3 Plan of Approach BACKGROUND Market and Brand of Choice For the Marketing Research project 2005/2006 we chose to do our marketing research within the ice cream industry, in the Netherlands.

The Ice Cream industry in the United States developed rapidly; nowadays they have started to expand their market to other continents such as Europe and Asia. We can find so many international ice cream brands in Europe, especially in the Netherlands such as Haagen Dazs, Ben & Jerry’s, and Australian. Among the various international brands that are popular around the world, we are most interested in Ben & Jerry’s. We have noticed that Ben & Jerry’s is one of the most popular brands one can discover around big cities.

Furthermore, we decided to go for Ben & Jerry’s because we will benefit by doing research in The Netherlands since Ben & Jerry’s is under the Unilever, which is part of the Unilever Group owned by the Netherlands-based Unilever N. V. and UK-based Unilever PLC, which is also one of the biggest consumer product company. Ice Cream Market Issues Sales of impulse ice cream are set to register positive value growth of 5. 5% during 2003, reaching a value of EUR 216. 8 million stimulated by good weather at the beginning of the summer season and dynamic impulse in terms of new product development and advertising.

In volume, sales are expected to increase by 2%, indicating a marked preference for the higher value innovations introduced by leading manufacturer Unilever. Much of the growth are predicted to be driven by dairy-based impulse ice cream, which is the most popular product in the Netherlands with sales accounting for nearly 70% of total volume. Ben & Jerry’s Market Research Background Proposal 4 Plan of Approach Furthermore, the single portion dairy ice cream is expected to register higher value growth in 2003, at 8. %, which lead to improving the performance of previous years due to a combination of better weather and intense brand and product promotion. Important Issues about the Brand Ben & Jerry’s are using special characteristics for their brand that are simple to pronounce, recognize, and remember. The cow and green environment behind their logo is depicting their awareness of quality and benefits. Ben & Jerry’s tries to acknowledge their customers that they always use natural and fresh milk, always keep clean and green environment while producing their ice cream.

To promote and to prove their mission, Ben & Jerry’s uses special slogan like “From Cow to Cone”, “Lick Global Warming”, “Organic Ben & Jerry’s”, and “50 Ways to Promote Peace”. Since Ben & Jerry’s target market is ranging from kids to elderly people (Family), they have to ensure that there is an existence of brand awareness in specific segments. For kids, they would be more interested in the ice cream packages or paper with their favorite cartoons, such as Disney’s characters or Warner Bros.

For adults and elderly people, they would take into consideration more about the nutrition facts, taste, and low-fat ice cream. Thus, it will be more interesting for them to see “Organics, low sugar, or low fat Ice Cream”. Ben & Jerry’s are using brand extension to develop their brand. They have produced thousand of ice cream flavors under the name of one successful brand, which of course is “Ben & Jerry’s”. They have extended its brand to organic ice cream, original ice cream, scoops menu, bars original ice cream, single original ice cream, and single novelties with different choice of taste in each product.

?Unilever has undergone various organizational structure changes since its inception. It initially started with a decentralized structure from 1950- 1980. Decentralization gave the company an advantage as they had the flexibility to change according to local consumer demand. They appointed managers who were local to that place so that the company had a good understanding of local market. The local managers were responsible for everything from marketing, sales and distribution.

But Decentralization led Unilever to not have any common corporate culture or vision. It also led them to duplication of products, resulting in high costs. Moreover, they had less focus on globalization and couldn’t create global brands. In 1990 the company changed its structure based on business groups. The company became more centralized. They streamlined their operations so that they could get the products onto the market quickly. This structure too failed as they were no coordination between head office, regional and national groups.

The decisions were made by regional heads and local managers had no power to change them to suit to local markets. Finding a right balance between centralization and decentralization was their major problem. In 1999, Unilever decided to adopt a “Path to Growth Strategy”. They realized that they had a broad range of products and never had any focus on ones in which they were one among the top in market. So they switched to a structure based on global product divisions. Unilever was split into two separate global units namely Food and HPC headed by two executive directors.

But they still had problems as the company had 2 separate chairmens in different countries which led them to operate as separate entities (Unilever NV and Unilever PLC. ). In 2005 as part of “one Unilever” Programme they scrapped this management structure by naming Patrick Cescau as single chief executive of Unilever. The company started to operate with matrix structure with multiple lines of authority based on product, regional and functional divisions. The company currently has 4 product divisions namely Foods, Personal Care, Home care and Refreshments headed by 4 different people.

They have got 8 leads based on regional splits heading North America, Europe, North Asia, South East Asia and Australasia, South Asia, Latin America, Africa (Central Africa and South Africa) and Russia/North Africa and Middle East. In terms of functional division there is a finance, marketing, R&D and HR departments. This simplified management structure has given all the Unilever top managements greater accountability and better leadership. It has helped them to eliminate duplication, take faster decisions, target on specific products and capture the global and local market.

Selection Of The Product

The Product chosen by me is Dove Company is Hindustan Unilever Limited (HUL)

Company Profile

HUL is India’s largest FMCG Company with a p of over 75 years. Having 35 brands pning 20 distinct categories such as soaps, shampoos, detergents, cosmetics, toothpastes, skin care, deodorants, tea, coffee, ice cream, packaged foods and water purifiers, the Company is a part of the daily life of millions of consumers across India.

Over 16,000 employees and annual turnover of around Rs. 19, 401 crores (financial year 2010 – 2011). HUL is a subsidiary of Unilever and leading supplier of fast moving consumer goods with powerful local hold in more than 100 countries all over the world with annual sales of about €44 billion for 2011. Unilever has about 52% shareholding with HUL. Particulars| Total Numbers | Comments|

Brands| More than 35| Well established brands catering to various market Segments| Products| More than 250| Huge umbrella of product family and product line| Direct retail coverage | 600,000 | Includes both on and off premise outlets | Household reach | 80% | Every 2 in 3 Indian uses HUL product | Shelf availability | 84% across India | Very deep market reach of | Dove Dove’s started off in the US in 1957; is leading brand of Unilever globally. Dove is marketed in 80 countries worldwide with a range of products from lotions, body washes, skin care and moisturising creams.

Dove hair care range was brought to consumers in 1998 in Europe and in 2003 in North America. HUL launched the Dove hair care range in May, 2007 which included shampoos, conditioners, and revitalizing masks. Dove became the fastest growing shampoo brand in the country in a short period of time of around 13 months. The range claims to deliver the moisture promise of Dove. It has a specific formulation of chemicals which are mild and soft to the skin composition. Dove enjoys a star position for damage repair and therapy. Dove has hair care products that repair damage to the hair.

The new Zero Damage System range includes ‘daily therapy’ shampoo, ‘dry therapy’ shampoo and conditioner, ‘breakage therapy’ shampoo, conditioner, serum and hair-mask.

Context

Indian hair care is divided into categories

• Hair oil
• Shampoo/conditioners,
• styling products,
• herbal remedies and
• hair-dyes and colors.

Sachet sales contribute approximately 40%,. Hair care and shampoos targets upper middle class, middle class and upper class rural customers. Market is expanding to lower class too. Main consumer categories targeted are women. The usage of shampoo in Indian society has evolved with increasing rate.

Today average usage in Indian population comes out to be2-3 times a week. Use of conditioners is still mostly in the super premium segment. Indian women require more shampoo as compared to western women because of thicker texture, longer average. Awareness counts for about 90% in urban areas giving 80% of total consumption whereas; in rural areas awareness counts for about 80% which is for the remaining 20% of consumption.

Competitors Market Scenario Product Category

Hair Care

The hair care market in India is valued at $200 million with a growth of 3. 8% year by year. The hair care market includes

1. hair oils.
2. shampoos.
3. hair colorants & conditioners.
4. hair gels.

Shampoos

The shampoo market carries a value of Rs 4. 5 billion with market penetration level of only 13% in India. Shampoos are available in the form of shampoo bottles of different volumes as well as 8ml sachets. Sachet makes up to 40% of the total shampoo sale. The shampoo market in India is divided into:

• Cosmetic
• Anti-dandruff

More than 50% of the population uses soaps for hair care. The shampoo penetration is only 30% in metros. The major players in the today’s shampoo market are HUL, and Procter & Gamble.

Segmentation

Market segmenting is dividing the market into groups of individual markets with similar wants or needs that a company divides into distinct groups which have distinct needs, wants, behavior or which might want different products & services. According to Philip Kotler, “Market segmentation is the sub dividing of market into homogenous subsection may conceivably be selected as a market target to be reached with a distinct marketing mix. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private. The concept f market segmentation was first proposed as an alternative market development technique in imperfectly competitive markets that is, in markets where there are relatively few competitors selling an identical product. Where there are lots of competitors selling identical products, market segmentation and product differentiation produce similar results as competitors imitate your strategic approach more quickly and product differentiation approaches meet market segment needs more closely. With an increasing proliferation of tastes in modern society, consumers have increased disposable incomes.

As a result, marketers have sought to design product and service offerings around consumer demand (market segmentation) more than around their own production needs (product differentiation) and they use market research to inform this process Since there a large number of competitors in the shampoo market selling almost identical products that have almost similar attributes and properties market segmentation should be devised for Dove shampoos. The figure shows the types of segmentation taking into account various criteria. The relevant differentiators applicable to Dove shampoo is mentioned below. Demographic | | | | | | | | | AgeSexLevel of educationSocial Class| The target consumers would be the age class from preteens to old age. It is commonly observed that there is no much differentiation in the usage patterns in relation to age even though the attribute in the shampoos that is sought might vary within different age groupsShampoos are used by both men and women although in varying degrees and frequencyDove is a premium shampoo primarily targeted at educated middle class consumersSocial Economic classes from B1 particularly the upper middle class and high income groups would be likely to afford and be aware of the product. Geographic | | | | | | The primary consumers would be the Urban middle class and above. It would not be affordable for rural markets| Psychological | Psychographic | It tries to change the psychology of an average looking women that she can look equally beautiful. Some consumers have the perception that the chemicals in the shampoo render the Hair dry.

The moisturizer concept can be used to address this | Benefits sought | | Consumers hope to derive a number of benefits like Dandruff control, Hair Therapy, Oil control through shampoo usage| Behavioral | Product usage | The products are used on an average of 2 to 3 times per week among almost all age categories with a slightly higher frequency for dandruff control | | Media usage| The media usage of the target customers would be magazines newspapers and TVs so that communication efforts can be directed to these channels to cater to the prospective consumers| | | |

Targeting

The main target market is upper middle class and premium class people (higher socio economic group). It targets the Indian young women and focuses on real beauty of women widening the stereotype view of beauty. The targeting strategy can be presented as division of three aspects: Age, Sex and Lifestyle. The age group segment of 17-50 years old women (mainly youngsters, Teens and Pre-Teens) who are socially active with or without job and belong to the premium section of the society.

Dove Product Lifecycle

Dove shampoo is in the growth stage. As Dove is becoming successful and sales has started to grow rapidly as it became established. BCG Matrix STAR Dove| QUESTION MARK ? | CASH COWS | DOGS | BCG Matrix (Boston Consulting Group Matrix) The “BCG matrix” or Portfolio Analysis is a portfolio planning model had been created by Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with analysing their business units or product lines.

This helps the company allocate resources and is used as an analytical tool in marketing, product, strategic management, and portfolio analysis. A high-growth product is for example a new one that we are trying to get to some market. It takes some effort and resources to market it, to build distribution channels, and to build sales infrastructure, but it is a product that is expected to bring the gold in the future. A low-growth product is for example an established product known by the market.

Characteristics of this product do not change much, customers know what they are getting, and the price does not change much either. This product has only limited budget for marketing. There is the milking cow that brings in the constant flow of cash. An example of this product would be regular Colgate toothpaste.

• Stars whose high share and high growth assure the future;
• Cash cows that supply funds for that future growth; and
• Question marks to be converted into stars with the added funds.

Stars

Dove shampoo has a high growth and high market share Dove is ahead of Pantene by a large margin in the category of shampoos. Its value share is 18. 6 per cent to Pantene’s 10. 1 per cent. In the top six metros of the country, Dove has a value share of 12. 6 per cent to Pantene’s 11. 7 per cent. In urban India, Dove’s share is marginally behind Pantene’s 11. 1 per cent at 10. 6 per cent, while, on an all-India basis, Dove is 7. 9 per cent to Pantene’s 9. 4 per cent.

Highest Market Share

The company holds a 44% market share in the Indian shampoo industry.

Introduction

When evaluating a company important is to know the company’s history, operations, and the nature of the business in which it operates. On the other hand by reviewing the company’s financial statements, operational practices we can evaluate its performance and compare it with the previous years or with the key competitors. By analyzing its financial indicators we can assess how profitable and sound the company is. This research paper will give a brief description of Unilever, its main divisions and products, its management structure, and the financial performance evaluation, with an aim to highlight the best practices and the growth drivers.

 Profile of the company, its divisions, products, and supply chain Unilever is a multinational corporation and is one of the worlds fast-moving consumer goods companies with a host of well-known brands. The company operates through four segments: Personal Care, Foods, Refreshment, and Home Care. Unilever is a joint venture of two companies that date back from the late nineteenth century. It was formed by two Dutch families, Jurgens and Van den Bergh, butter merchants who later started producing margarine and by the British soap producer William Hesketh Lever. Since the early nineteenth century the two companies were concentrated on acquisitions and in early 1929 they signed an agreement to create Unilever. Unilever over the last two decades acquired the meat business Zwanenberg’s at Oss, Lipton International, Brooke Bond, Naarden, Calvin Klein, and Elizabeth Arden/Faberge, Brayer’s ice cream, Kibon ice cream, Bestfoods, Slim-Fast Foods, Ben & Jerry’s and the Amora-Maille. In 1992 Unilever entered the Czech Republic and Hungary and established UniRus in Russia, also enters in India and other parts of the world.

V. operates as a fast-moving consumer goods company in Asia, Africa, the Middle East, Turkey, Europe, and the Americas Unilever possesses a portfolio of more than 400 brands, from nutritionally balanced foods to indulgent ice creams, affordable soaps, luxurious shampoos, and everyday household care products. Their products are sold in more than 190 countries, generating sales of €51 billion in 2012. In the 21st century, they launched growth strategies, in order to transform the business, leading to more acquisitions, rationalization of manufacturing and production sites to form centers of excellence. Unilever is responding quickly to rapid shifts in consumer behavior by investing in Research and Development and changing market conditions. Unilever sells its product across 170 countries and its procurement teams are purchasing from a network of around 160,000 suppliers worldwide. For the same reason, its suppliers’ materials and services are an integral part of their commercial operations. Unilever has an integrated supply management information system that helps their local, regional, and global supply managers to make appropriate sourcing decisions, allowing them to analyze information quickly and easily.

Through this system, they can negotiate with their suppliers in a more transparent and efficient way. Unilever’s largest international competitors are Procter & Gamble and Nestle. While the competition in local markets or specific product ranges from numerous companies, including Beiersdorf, ConAgra, Danone, Henkel, Mars, Pepsico, and others (Unilever) Management Structure Maintaining good governance is one of the essentials factors for the long-term success of the company. For the same reason, Unilever is engaged in conducting its operations in accordance with internationally accepted principles of good corporate governance. The success of Unilever is due to a combination of structural formality and managerial flexibility. Being a company that is present for more than a century, that operated in changing and transitional environment, is evidence of a flexible management structure that made Unilever successful. Learning through a trial and error Unilever has focused on two reliable and related practices to strengthen all structural changes: recruitment and training of high-quality managers and the importance of linking decentralized units through common corporate culture. Unilever’s companies maintain formal processes to inform, consult, and involve employees. They recognize collective bargaining on a number of sites and engage with employees. Their usage of site tools such as Total Productive Maintenance relies heavily on employee involvement, contribution, and commitment. The profitable growth that Unilever accomplishes is mainly due and is achieved through the right people working in an organization that is fit to win and with a culture in which performance is aligned with values.

Unilever has built an employer brand development tool which leverages best practice and adapts recruitment models to reach the best people worldwide. The better recruitment, family-friendly working conditions, a culture of accountability, initiatives, and remuneration represent one of the crucial factors for the success which it achieves. Ability to earn income Unilever’s ability to earn an income has increased due to the increase in revenue. In 2012 their ability to earn an income has increased by 8. % compared with 2011, and with no changes from 2010 to 2011. The raw materials and consumables from 2010 to 2011 decreased by 1% and in 2012 by 1. 3%. On the other hand, the finished goods and goods for resale increased by 8. 5 in 2011 and a decrease of 3. 35% in 2012. This change in the finished goods and goods for resale was charged to the income statement for damaged, obsolete, and lost inventories. Reliance on debt financing The net debt position in 2011 was 8. 781 billion or €2. 1 billion higher than the last year, in part due to the acquisition of Alberto Culver. In 2012 the net debt was 7. 355 billion, or 1. 4 billion lower than in 2011.

The cash outflow from acquisitions, dividends, tax, net capital expenditure, and interest, and the negative impact of foreign exchange rates exceeded the cash inflow from operating activities and business disposals. The leverage ratio reveals that 32% of the financing it’s covered by debt. Key indicators for 2011 and 2012 The sales growth of Unilever in 2011 increased by 6. 5% and volume growth by 1. 6%. Emerging markets delivered 11. 5% underlying sales growth and turnover of 5% compared to 2010 (Annual Report 2011, p. 9). In 2012 the sale growth increased by 6. % and volume growth increase of 3. 4%. Emerging markets represented 55% of the turnover or 11. 6% of sales and turnover of 10. 5% compared to 2011. The profitability of various product lines and geographical regions The region with the highest turnover, sales, and volume growth in 2011 and 2012 in Asia, Africa, and Central & Eastern Europe with over €20. 5 billion of turnover in 2012 and €18. 9 in 2011. Followed by Americas €17.

FINANCIAL RATIOS FOR UNILEVER

• Operational analysis Formula
• Formula
• Average inventory2010 =3942.
•  Average inventory2011 =4454
• Average inventory2012=4518.
• Inventory turnover ratio2010 =6. 57

 A number of days receivables outstanding2011 =21. 3days Receivables Turnover 2012 =14 Av. Number of days receivables outstanding2012 =26days. Conclusion: In the year 2010 the UN has performed better. Higher the ratio, better it is. This means that in 2010 it required 20 days to collect its receivables from customers. Formula  Working Capital Turnover2012 = -14. Conclusion: In the year 2012, the UN has performed better. Higher the ratio, better it is. This means that in 2012 the UN had more efficient utilization of the working capital, needed for maintaining a certain level of sales, and even though it is negative we can see a sharp decrease during the precedent years.

• Current Ratio 2010 = 0. 92
• Current Ratio 2011 = 0. 79.
• Current Ratio 2012 = 0. 76

Conclusion:

In year 2010 UN has higher ratio. A commonly acceptable current ratio is 1. 5-2. This level of ratio may show than the UN cannot meet its short-term financial obligations. Formula 2. 2 Quick Ratio2010 = 0. 36 Quick Ratio2011 =0. 37 Quick Ratio2012 =0. 46. Conclusion: In the year 2012 the UN has a higher ratio. This means that in 2012 the UN was more financially secure to meet its short-term financial obligations.

The purpose of this paper was to reveal the financial performance of Unilever and to make an evaluation and assessment of the firm’s management structure and what contributes to the success they achieve and key figures and ratios. The financial position of Unilever for 2012 was admirable, due to the fact that had increased revenues, sales, and volume growth of its divisions worldwide and decreased net debt. They compared data for 2010,2011, and 2012 show continuous improvement and an increase of their financial position.

References

1. Unilever site www. unilever. com
2. Annual Report 2012, Available at: http://www.unilever.com/images/ir_Unilever_AR12_tcm13-348376. pdf [Accessed date 05/03/2012]
3. Annual Report 2011, Available at: http://www.unilever.com/images/Unilever_AR11_tcm13-282960_tcm13-348380.pdf
4. [Accessed date 07/03/2012} Floris M. (1992), Inside Unilever: The Evolving Transnational Company, Harvard Business Review; Vol. 70 Issue 5, p46-52, EBSCO Host http://web. ebscohost. com/ehost/detail?vid=4=8aace911-769a-43f3-9949-b4364f9185cf%40sessionmgr111=124=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth=9301105365 [Accessed date 09/03/2012]

Unilever and P&G – Comparative Analysis Executive Summary The Consumer Products Industry is the biggest industry in the world at the moment, with total revenues amounting to about 50% of all goods sold. It is comparable to the GDP of the 4th biggest economy in the world, and entails most of the products we use in our every day lives. There are 3 key factors that drive the industry today: developing markets, the emerging middle-class of developing countries and the millions of baby boomers in developed markets.

The industry faces many challenges nonetheless, such as an increase in prices of raw materials, crude oil, crops and commodities – especially oil prices; the constant broadening of the industry caused by globalization; and an increasing tendency for consumers to shop at mass-discount shops rather than the well-established companies within the Industry. The main players in this industry are Unilever, P&G, Nestle, Johnson &Johnson, PepsiCo, Mars and Henkel. This report focuses on the comparative analysis of Unilever and P&G. Some of P&G’s most famous brands are Braun, Gillette, Oral-B and Pantene.

These and the top 50% of most well known brands account for 90% of P&G sales and more than 90% of its profits. Furthermore, 25 of these 50 brands go as far as generating more than $1 billion each in annual sales. Overall, the company markets its brands in over 180 countries across the Americas, Europe, the Middle East and Africa (EMEA) and the Asian region. Despite the recent crisis, P&G continued to experience growth due to a strategy of “investments in innovation, portfolio expansion, marketing support and consumer value”. The company is also investing $2 billion in R&D annually.

As for Unilever, the company owns more than 400 brands, and 2 million people use Unilever an product on any given day. Unilever is based in 100 countries and sells products into more than 150. The long-term goals are continuous improvement and developing a sustainable business, and the company has over 6000 people working in R&D across the globe for a total of $1,3 billion worth of R&D investments in 2011. In terms of financial comparative analysis, market Ratios for both companies show that Unilever and P&G are attractive investments for investors.

P&G has a higher EPS on average and is a more preferable investment currently for investors looking for high returns. The market ratios also show that Unilever has been improving its earnings and has a higher earning potential in the future as its EPS, P/E and payout ratio have been improving over time. P&G on the other hand currently has a higher yield as shown by the Dividend Yield ratio but its performance seems to be declining gradually as evident by the worsening Market Ratios.

The Liquidity ratios of both companies clearly point out to the fact that the companies are not in a position to meet their immediate liabilities. However, this is not a matter of concern as both companies are large, stable and established businesses. The liquidity ratios show an adverse situation for the companies even though they are healthy otherwise. This is because the industry is such that the companies must have high current liabilities over extended periods of time and low assets due to very fast inventory turnover rate.

The consumer goods industry requires that a company’s inventory turns be fast and the accounts payable be large over long periods of time to have a high level of efficiency and consequently profitability. It also assures both corporations a competitive edge and for this reason liquidity ratios must remain low which may seem unhealthy but in reality is helpful in this particular industry. From 2007 to 2011 Unilever consistently had higher growth rates in revenue, operating and net profit. During this time p P&G profit growth rates even were negative.

This indicates that P&G is from an absolute point of view still bigger and more profitable, but Unilever is catching up. A closer look at the profitability ratios shows that both companies are doing very well with gross ratios of 43,80% (Unilever) and 50,56% (P&G). These ratios are above the 40% industry average and especially P&G is very profitable. This first indication is consistent with the further analysis of profitability ratios such as the net profit margin, which is still is 5% higher for P&G than Unilever.

So far P&G has managed the increasing pressure on margins due to increasing raw material prices more successful than Unilever, but has to adjust its cost-structure to stop the ongoing negative trend of the last five years. Regarding efficiency ratios like return on capital ratios the previous dominance of P&G’s financial performance cannot be confirmed. Instead, Unilever outperforms P&G in all efficiency ratios, like the return on invested capital (16,89% vs. 10,42%), the return on assets (11,26% vs. 8,99%) or the return on capital employed (16,66% vs. 14,06%) for the time p between 2007 to 2011.

This indicates Unilever outstanding capabilities to allocate its resources to the most profitable investments and to use the assets as efficient as possible. In terms of the debt situation for P&G and Unilever, analysis has shown that Unilever’s business is higher leveraged (D-E ratio 2,13) than P&G’s (1,09). This and the higher efficiency also explain why Unilever’s return on equity is much higher (36,06%) than P&G’s (18,78%). As a result of its high profitability and low debt-to-equity ratio, P&G’s TIE ratio is also much higher than Unilever’s (11,95 vs. ,61). The analysis has shown that P&G is a more conservative financed and highly profitable business whereas Unilever is more aggressive in terms of growth. Unilever already is highly efficient and has grown much faster than P&G over the last five years. If this trend is not reversed P&G will face increasing competition from Unilever in the close future. We’ve calculated the average over five years for each company’s activity ratios and compared them as such because these ratios seemed to be relatively stable over time.

They also appear to be in line with the companies’ strategies and policies, starting with the Asset Turnover being proportional to the return on equity: Unilever has a turnover almost double that of P&G. As we’ve mentioned earlier, fast inventory turnover is a characteristic of the industry, but Unilever seems to be doing better than P&G in these terms as well. We believe that Unilever’s focus on food products gives it a higher Inventory Turnover (9,09) compared to P&G’s household products focus (5,41).

This gives Unilever a lower average age of inventory. Unilever also has a higher Day Purchases Outstanding Ratio, meaning they stretch suppliers much more by taking 88,40 days to pays them, compared to P&G’s 65,48 days. Strictly speaking, we would expect P&G to display a higher bargaining power to do its much higher Revenue, but this ratio shows a different story. Reasons for this could be due to geography, both in terms of differences in local management and in local regulations, and to the diversity of suppliers induced by the focus on 50 or 300 brands.

In terms of the Day Sales Outstanding Ratio, it is P&G that seems to have the better policy this time. They convert Accounts Receivable to Cash in about 28 days versus 35 days for Unilever. Again, although smaller, this difference is important because it can reflect a difference in policies or diversity of suppliers. These two factors combined, low DSO and high DPO Ratios, lead to a negative Net Working Capital such as we had seen in our Walmart analysis. Compared to Assets, P&G has a negative NWC of -27% and Unilever of -20%.

In conclusion, both companies show very strong financial health given the crisis, especially compared to the rest of the market. They are defensive values which show that their policies are working to resist the crisis. In absolute terms P&G is doing better as a company because it is a bigger, stronger, established firm. In relative terms the ratios paint another picture though: Unilever has been catching up to P&G in recent years, and their growth and financial management seems to be stronger than that of P&G.