By Tunde Osho
Unilever is giving responsibility for its marketing and advertising activity and budgets to three new divisions, set up as part of a wider shake-up of the firm’s structure that will see it shift from its dual-governance structure to a single legal entity.
The FMCG giant is “streamlining” its business by setting up new beauty and personal care, home care, and foods and refreshment divisions in a re-organisation it hopes will increase agility and competitiveness.
The more “streamlined” structure will see the company split into three divisions: beauty and personal care, home care, and foods and refreshment. The first two will be based in London, while the latter will continue to be headquartered in Rotterdam.
These divisions will take over responsibility for marketing and advertising, as well as innovation, strategy, research and product development. Under the new structure Unilever’s ‘country category business teams’ will remain in place but now report into the separate divisions with the hope this will offer more agility and connection to key consumers and markets.
For example, each division will be able to allocate resources “more dynamically” between geographies and make its own investment decisions based on strategic objectives. They will also be able to make recommendations for capital allocation, both in the supply chain and in terms of acquisitions.
Of critical importance for success is to combine scale with agility. Unilever will not be run by a corporate centre but by three empowered divisions.
The divisions will, however, continue to benefit from central functions including procurement, and data and digital capabilities. Unilever highlights U-Studio, its in-house content agency, as one example of added value for the divisions.
In terms of marketing, the divisions will have more responsibility for budgets. The changes don’t impact Unilever’s overall brand and marketing investment, which is set to be broadly flat this year across the business, or its overall strategy and financial goals through to 2020.
Speaking on a call with investors on March 15, Chief Financial Officer, Graeme Pitkethly said: “Of critical importance for success is to combine scale with agility. Unilever will not be run by a corporate centre but by three empowered divisions.
“This is the logical next step in the transformation of Unilever. It will drive long-term shareholder value and provide increased flexibility, strengthen corporate governance and enable our divisions to better serve consumers by balancing scale and agility.”
As well as the new divisions, Unilever is simplifying its corporate structure so it will no longer have two headquarters in Rotterdam and London but a single entity based in Rotterdam. The company says the decision to move to The Netherlands was spurred by the fact that the Dutch NV represents 55% of the group’s overall shares and that those shares are more liquid. It dismissed speculation that the decision was based either on the Brexit vote or the more rigorous approach to hostile takeovers in The Netherlands.
And in practice little will change on the ground, with only around 100 of London’s 7,000 staff expected to move to Rotterdam and all other teams, including marketing, remaining in place.
Unilever chairman Marijn Dekkers explained on the call: “We are very clear that it is the right way to go to this single structure. In 2005 [when the structure was last reviewed] these were really operationally – not just from a corporate structure point of view – two very different companies that had a history of being run by two executive chairmen and a balance of UK and Dutch parts.
“One Unilever came in 2005 and this was operationally addressed, but not [addressed] from a corporate structure point of view. Now [that Unilever is] operationally one company, it is easier to not drag that old structure further along; no one here thinks like that anymore.”