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Beauty Inc issue 05/10/2013

Unilever’s heritage stems from soap, but these days, it’s the company’s beauty business that is really bubbling up. After a decade of fits and starts, the Anglo-Dutch giant has transformed its personal-care business into a mass-market leader. Globally, Unilever posted double-digit gains in personal care in 2012, which accounts for 35 percent, or about 18.1 billion euros (about $23.5 billion at current exchange), in overall sales.

This story first appeared in the May 10, 2013 issue of WWD.  Subscribe Today.


The numbers in North America have been equally as impressive, driven by the dynamic vision of a powerful new management team: Kees Kruythoff, a 20-year Unilever veteran who was appointed president of North America in September of 2011, and Gina Boswell, the executive vice president of personal care, North America, who was named to her current role in July of 2011, shortly after Unilever completed the acquisition of her previous company, Alberto Culver, where she was president of global brands.


“If you had asked me how Unilever was doing a couple of years ago, I would have said they were chock-full of poorly differentiated brands, strolling along the sales cycle without really thinking about the portfolio and what consumers are looking for,” says Victoria Gustafson, principal, strategic insights, of the SymphonyIRI Group. “In the last couple of years, I have seen a huge change, particularly in hair care.”

The numbers bear Gustafson out. According to SymphonyIRI, Unilever’s hair business was up 4 percent in 2012 and 5 percent thus far this year, versus a couple of points for the overall market. “They are doing really well in bobbing the market up. Without them, it would definitely not be such a happy story that we’ve seen in 2012,” says Gustafson. “They did what they do best, which is innovation, without neglecting their base business. We see it across the board.”

Bill Schmitz, an analyst at Deutsche Bank, agrees. “Look at their global organic growth in beauty,” he says of Unilever. “Their market shares are up in every single one of their categories. Their global organic growth is as good or better than any other company I follow, and it all trickles down from [chief executive officer] Paul Polman and the talent cultivation. These guys are terrific. They are so well trained.”


Polman, who became ceo in 2009, was the first outsider named to the post. His vision of the company is crystal clear, as are his expectations for the division. “Unilever’s personal-care brands are critical in delivering our ambition of doubling the size of our business [from 40 billion euros to 80 billion euros], while reducing our environmental footprint and increasing our positive social impact,” he said in an e-mail. “Personal care is our largest category, making up 35 percent of our portfolio, up from 28 percent in 2008.”


Kruythoff certainly represents the new generation of talent at the company who are helping to make Polman’s vision a reality. Most recently, the 44-year-old was ceo of Unilever Brazil, the company’s second-largest business. Prior to that, he ran the South African business for four years. Today, in addition to overseeing North America, the company’s largest independent market, Kruythoff sits on the 16-person Unilever Leadership Executive team.


Energetic and extraordinarily passionate about the business and the company, the Dutch native becomes volubly excited when discussing the evolution of the North American beauty business. “We have said we will only win in personal care globally if we win in America,” says Kruythoff. “We have a real growth agenda in the U.S. It is all about growth, growth and growth, and it is about investing in America.” Kruythoff cites some figures: Unilever’s global growth in beauty in 2012 was 17 percent, of which 10 percent was underlying growth and 7 percent came through acquisition. The U.S. accounted for slightly more than 15 percent of the global growth, about $5 billion in sales overall. “What you see is we have a very clear growth agenda,” says Kruythoff. “Growth is coming from the emerging markets and it is very clearly coming from the U.S., too.”


Polman echoed the sentiment. “In the U.S., personal care—including hair care, skin care and deodorants—is nearly a $20 billion industry,” he said. “As the category evolves, we continue to increase our investment to expand with it by focusing in growth areas, such as the men’s category, and investing behind new brands and innovations.”

Kruythoff’s experience in developing markets has helped shape his thinking strategically for North America. “To go from an emerging, fast-growing country like Brazil to a mature, biggest market in the world—interestingly, there are more growth opportunities than I had anticipated,” he says, leaning forward as he talks. On one wrist, he wears an American flag cuff link, on the other, a Canadian maple leaf. “My wife first gave me the American cuff links, but the Canadians, who I’m also responsible for, said you can’t wear only those,” says Kruythoff. “So the size is 10 times bigger marketwise, but it’s 50-50 wrist share,” he laughs.


Turning serious again, he continues, “What you think when you come from Brazil is that everything is underdeveloped versus the U.S., but that is not the case. Some countries have already leapfrogged. Now we can leapfrog again,” he continues, citing as an example the propensity of women in Brazil to have a multistep hair-care regimen versus the standard shampoo-conditioner routine of American women.


Leading Unilever’s charge for growth in personal care is veteran beauty-industry executive Gina Boswell. Prior to Alberto Culver, she was chief operating officer of Avon North America, and also held senior positions at Estée Lauder and Ford Motor Company. Analysts say her depth of business experience combined with a deft touch in beauty is a game changer for Unilever. “With her background, she brings the knowledge of the excitement that is required for growth from an industry that is highly innovative, very personal and very emotional,” says Gustafson. “That is a huge difference, between the way cosmetics are managed and personal care is managed.”

The ascendancy of Kruythoff and Boswell comes at a pivotal time for the mass market overall, and Unilever in particular. According to the WWD Beauty Inc Top 100, Unilever ranks third in global beauty sales behind archrivals L’Oréal and Procter & Gamble Co., but is outperforming both in the pace of its growth. Furthermore, although L’Oréal continues to successfully build market share in North America, P&G has struggled of late, with key brands like Olay and Pantene showing declines.


Unilever has wasted no time in exploiting that weakness, impressing observers with the speed and skill in which it integrated the Alberto Culver brands into the overall brand portfolio while simultaneously launching new brands like Clear hair care, Simple skin care and Dove Men+Care skin care in the U.S., all in a 24-month period. Today, Unilever’s personal-care universe consists of 20 brands across hair, skin care, skin cleansing and deodorants that represent a good-better-best strategy in terms of price point and demographic segments. They range from master brands like Dove and Suave, which feature men’s and women’s products in all categories, to the men’s powerhouse Axe to leading hair-care brand TRESemme and heritage skin and body-care brands Noxzema, Pond’s and Vaseline. There are also a number of ethnic-market lines.


“We have a portfolio that goes from $1.99 all the way to $20-plus,” says Boswell. “It’s wide-reaching and very diverse, meeting several different demographic segments along unmet needs, with all sorts of different forms and innovations.”

Innovation is a word that comes up often in conversation with Kruythoff and Boswell. Boswell points to Vaseline Spray & Go, a moisturizing body lotion in a spray format, as an example of a recent innovation that is driving sales and premiumizing a heritage brand, another key goal.

Gustafson says the item is transformational for the body-lotion category. “Hand and body lotion has been in trouble for a long time,” she says, adding that growth is coming either from medicinal therapeutic lotions that treat scars, eczema and the like and cost upwards of $15 or conversely, inexpensive lotions. “The mid- priced lotions were really squeezed,” says Gustafson. “If you look at the shelf, it is a sea of white bottles. It is very unexciting.”

She compares that with the bright green, yellow and chocolate brown cans of the new Vaseline product. “It is easily absorbed and you don’t even have to take your rings off to use it,” Gustafson points out. “The insight that you can do things differently is what’s required to bring excitement to a very unexciting category.”

For Boswell, that is exactly the point, whether the product is hand lotion or hair care. “Whenever you see stagnation or underpenetrated opportunities that you can’t get with the next flavor, you must really break the paradigm and come up with a new form to drive it,” she says. “There is a lot of congestion. There is just so much you can navigate through as a consumer. Innovation is the antidote to that.”

Hence the launch of Clear, a hair-care master brand with men’s, women’s and ethnic segments that launched last year with the unique positioning of scalp therapy. Coupled with Unilever’s multipronged category approach that consisted of underperforming brands like Thermasilk and Sunsilk exiting the U.S. market, powerhouses like Suave infused with category-relevant innovation, such as the introduction of the Suave Professionals Moroccan Infusion, and the Alberto Culver acquisition brands leveraged with launches like TRESemmé Keratin, and the result was a big win for the company. According to SymphonyIRI, sales of Clear reached $80 million over the last 52 weeks, not including Wal-Mart. TRESemmé and Suave are also outperforming the market.


“Our view in hair care is that the days of having massive, monolithic brands that serve everyone’s purpose are gone. Now, what you see are customized, expert solutions,” says Boswell. “You cannot be one-size-fits-all in this market. It’s evolved too far to have that be your success model. Clear changes the conversation to be less about the roots and more about the scalp. Those kinds of things clear away the congestion.”


As strong as Unilever has been in hair, analysts see room for improvement, notably in the premium-priced segment. Although Alberto Culver successfully crossed channels by bringing Nexxus from salons into mass merchandisers, the brand has struggled of late.


“Whereas Unilever is really good at mid-price brands, they need to figure out how to manage the higher-priced offerings,” says Gustafson, noting premium hair care accounts for about 10 percent of mass-market hair-care sales. “One of the big appeals of a salon brand is that feeling of when you just walk out of a salon and your hair is shiny and bouncy and looks great. That’s the feeling you want to hold on to when you buy a $20 bottle of shampoo. Nexxus lost this. They need to figure out what this new feeling is that’s going to inspire a consumer to pay higher prices for premium hair care.”


At Unilever—where premiumizing the portfolio is a key engine for growth—cracking that code is absolutely key. “We see this segment of professional hair care as obviously interesting in its dynamic,” says Kruythoff. “We definitely see a trading-up trend.”

Boswell says that recent launches like Youth Renewal Antiaging Elixir and Hydra Light from Nexxus are helping to turn the tide. Some market observers suggest an acquisition could help drive Unilever’s growth in the category, noting that the brand Organix is widely considered to be in play. Boswell and Kruythoff declined to comment on those specific rumors, although Kruythoff, during a far-ranging interview, did note the company would continue to look at acquisitions, particularly in light of the successful integration of the Alberto Culver brands.


Skin care, too, presents another opportunity, say industry analysts. Unilever’s heritage brands such as Pond’s, Noxzema and St. Ives have been relatively anemic. Simple, the blockbuster launch of 2012 geared towards sensitive skin, performed well with about $50 million in sales, not including Wal-Mart, but didn’t contribute to category growth overall, according to SymphonyIRI. Boswell insists Unilever has a strategic commitment to assuming a leadership position in the facial skin-care market as it has done in hair care, deodorants and body wash. She ticks off each brand’s historical strengths and adds, “We have plans. Our strategic intent is to become a leader in the category.” Boswell adds that Unilever has delivered double-digit category growth for the past three years, with particular strength in men’s, up 20 percent over the last four weeks alone, and wipes, which have risen 10 percent.


Kruythoff says Simple points the way forward by going against the grain of antiaging and instead targeting a largely unmet consumer need—sensitive skin. “While we believe antiaging will always be there as a market, that segment will grow significantly smaller,” he says. “If you look three, five, 10 years out, [with] pollution and the effect on human skin, this notion about sensitive skin will grow exponentially. That is where there is a consumer need, and a technology opportunity which Simple is delivering on.”

Finding the white space and then leveraging it on a massive scale has worked well thus far for Unilever. Case in point: the men’s market, where Axe continues to dominate among young men, and recent launches like Dove Men+Care skin and body care and deodorants are gaining traction despite a challenging marketplace. “Men’s is very underdeveloped in the U.S.,” says Kruythoff. “We talk about the granularity of growth. If you look at the consumer-goods market in its largest sense in the U.S., it’s not growing, but you have so many pockets of growth. Everything is so big in America, you can put an economic system against it and this whole notion of granularity of growth and sizable niches becomes a fantastic opportunity. We talk about [being] the men’s market maker.”


Of course, Unilever isn’t the first giant to try to make this market. See also L’Oréal, Nivea, Neutrogena and, of course, P&G with Gillette, which is as dominant in the shave category as Unilever is in deodorant. “How many years have you been hearing about men’s beauty?” asks one analyst, whose company policy prohibits speaking to journalists for attribution. “We’ve heard about it forever, and it doesn’t seem like it’s gotten any traction.”


Kruythoff says the key to building a strong men’s skin-care business is getting retailer buy-in. “We talk about the men’s zone,” he says. “In the past, the industry has talked about for him and for her. Brands have to be able to deliver against that. We are getting that into store. Where we do it properly, we see it literally takes off. We see 100 percent growth in the segment if you do it properly.”


Most recently, Unilever dipped its toe into the blades and shaving business, partnering with Energizer Holdings’ Schick for disposable and refillable razors and Philips Norelco for electric shavers. When asked what the launch of razors portends for the future, Boswell says it is too early to tell. “We will explore additional distribution options and consider our longer-range plans after seeing the results,” she says, of the products which are currently only available in Wal-Mart. “We are still in the very early stage of the test market.”


Still, Unilever has shown itself willing to push boundaries to achieve its target growth. Take the recent introduction of Axe Apollo, which the company launched across all categories—deodorant body spray, deodorant stick, shower gel and two- in-one shampoo conditioner. For the launch, the brand created an entire campaign based around the premise that nothing is sexier than an astronaut, including a global contest in which 22 winners will be trained and sent into space, and a freestanding life-size astronaut display stocked with product that went into retail. Buzz Aldrin serves as the campaign’s spokesman.
“The creativity of our team is overabundant,” notes Boswell dryly.

“It inspires our consumers and our retail customers,” says Kruythoff. “It inspires the whole company. When [Paul] Polman did his full-year analyst’s report with our cfo, John-Marc Huët, they both came walking into the meeting dressed as astronauts,” Kruythoff chuckles. “You had to see those two guys.”

Such tactics are not only attention grabbing, they’re effective. Gustafson says that part of Unilever’s strength in the men’s sector derives from the fact that it didn’t resort to discounting during and after the recession, as many other brands did. Coupled with their prowess at consumer insight and the results are the best in the market. “Men’s is a very solid business for them based on their understanding of the consumer,” she says. “Axe is more aspirational, it’s ‘this is the kind of man I want to be’ versus ‘this is the kind of man I want to smell like.’ It’s fun and different and they understand that it doesn’t have to be a car to be aspirational, that a $5 item you use everyday can be aspirational and buck you up.”


In addition to the men’s sector, Kruythoff sees a lot of opportunity in the value segment, via retailers such as Family Dollar and Dollar General. “When you look at a stressed economy, we have so much learning out of emerging markets,” he says. “How do we create propositions where you don’t at all take out the self- esteem and deliveries of the product, but you get it into affordability.”


“We see staggering numbers, like 45 million people in the U.S. on food stamps,” Boswell adds. “There is clearly a low-income segment. So what can we do in terms of the way we put pack sizes together, smaller sizes, samples, etc., because literally, a certain segment of the population is requiring that. We, as a company whose vision is to make people’s lives better, must deliver against that.”


While that notion sounds altruistic for what is, after all, a business, it actually holds the key to future growth for the company overall. When asked how he has seen Unilever change over the last 20 years, Kruythoff ticks off a three-point progression. “The first inflection point has been that we used to have companies that were really local. When you were in South Africa, you ran South Africa and had acquisitions for South Africa. What we did not get was this whole global skill and expertise into the organization.

“The second was when we started talking about ‘One Unilever’ in 2005-2006,” he continues, “[which enabled us] to go to market with this incredible brand portfolio.


“The third inflection point was when we defined our compass,” he concludes. “We said we’re going to double the business with less environmental impact and with more social impact. We talk about making sustainable living commonplace. We are building sustainable business models and that is our growth model.”


Kruythoff notes that since announcing its intention to double its overall business four years ago, 12 billion euros ($15.6 billion at current exchange) have been added to Unilever’s organic growth. “Our strategy is about growth, about being close to the consumer and making our brands more relevant in society,” he says. “Purpose-driven brands are closer to consumers and understand societal needs more. Therefore, growth is actually the most scientific measurement of your relevance to society.”


The company has indeed invested behind its core principles. Kruythoff notes that Unilever has modernized its core infrastructure in the U.S., including 180 production lines and 30 factories, sales offices and head offices, to be the company’s first country that is zero waste to landfill. “We are leapfrogging it from an infrastructure which was created a couple of decades ago to the next generation,” he says. “We are investing in the U.S. in our infrastructure, in sustainable manufacturing, in new brands, in improving the quality of our products.”


While that kind of new thinking is what Unilever believes will drive its future success, it’s still the fundamentals of running a business that will truly have to change permanently for the company to continue its blistering pace of growth in personal care. “Unilever’s biggest challenge is the sustainability of launches,” says Schmitz. “In the past, you’d see a big launch, they’d spend a ton of money and it came and went.”

Those days are unequivocally over says Boswell. “One of the things we’ve been doing since I arrived is not blinking,” says the executive. “Every year requires innovation and support and we are very, very intent on not just being attracted to the shiny new pennies. We are making sure the base is supported, especially as this year’s launches become next year’s base.”

She pauses before adding emphatically, “That was the old Unilever” of the launch-and-leave syndrome. “That is not the case today.”

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