SUAVE, DOVE DRIVES UNILEVER HPC
Byline: Andrea M. Grossman
GREENWICH, CT — Seven years ago, Unilever’s $4.5 billion North American personal-care business moved about like molasses, slowly churning out mid-single-digit operating profits.
But Path to Growth, a strategy established in September 1999 designed to adjust Home & Personal Care’s focus on 14 of its 25 core brands, helped change that. As Alan Jope, HPC’s chief operating officer put it, “a 5 percent operating profit business has no business being in business. You cannot focus on growth. You don’t have the financial flexibility.”
A first step was completing the consolidation of its three major businesses, an effort which began in 1997. And by the end of 1999, HPC moved to become one operating company. Finally, Lever Bros., maker of Lever 2000, Dove and Caress bar soap; Chesebrough-Ponds, maker of Ponds cold cream and Vaseline; and Helene Curtis, HPC’s hair care arm with brands such as Suave, ThermaSilk, Salon Selectives and Finesse, were melded together.
Five business teams were formed to manage HPC’s stable of brands by product category. There is one for laundry, a unit for hair, another for skin, a deodorant unit and one called specialty that includes oral care, household products and Q-tips.
And as Jope explained last week from HPC’s headquarters in Greenwich, Conn., the new business model worked.
By driving up gross margins and increasing its percent investment in advertising promotion, last year HPC generated an operating profit in the mid-teens. “Fifteen percent is very respectable, almost world class,” comments Jope.
And HPC isn’t finished tweaking. In November, a new executive model was built. Each business is now run by a general manager who reports to Jope, whose job is to deliver results to Charles Strauss, chairman of Unilever North America. And, boards were established to oversee each of the following areas: brand development, customer and channel development, supply chain, finance and human resources.
Now, Jope is ready to further expand HPC’s business by focusing on its 14 bigger, more important brands. It will start slowly, with high single-digit growth expected for 2001. To get there, he will do a combination of things. Some smaller, yet profitable brands will be migrated into more profitable ones. For example, last year HPC took Groom & Clean, a $4 million hair gel brand used by older men, and migrated it into Suave.
Some brands will be deemphasized. Some may even be divested or discontinued. Different brands respond differently to this approach, Jope explained. While Finesse, for example, may not be aggressively supported, it remains in Jope’s top 14 list of brands to focus on. “It did well last year with relatively modest investments,” Jope explained. Aqua Net and Rave, two brands not slated for aggressive support, also pull in “year-in and year-out profits.” Other brands, however, “fall off” the minute ad support stops. Jope’s dilemma is not knowing which brands will respond this way as HPC moves into a more focused program.
But more importantly, he noted, are brands that HPC will focus on. The two that stand out are Suave and Dove.
Both are half-billion dollar brands in the U.S. Suave hair care sells 200 million units a year, more than the entire Procter & Gamble hair care portfolio, which includes Pantene, Pert, Physique, Vidal Sassoon and Head & Shoulders, according to Jope. Fifty percent of all American households use a Suave product in a year, and Suave has grown by double digits in 10 of the last 13 years.
“Yes, Suave. It is a fantastic brand. People are always underestimating it and writing it off as this low-price, value proposition. But it has the highest loyalty in the hair care category; it has a deep emotional bond between it and its users,” Jope explained. Suave now bears its brand on personal care categories such as shampoo, deodorant, body wash, lotions, bar and facial soap. A new shampoo line, Aroma Benefits, is slated for April; Suave Skin Silkening Body Oil launched this month.
The growth of Dove also shows how Unilever drives its core equities. Introduced in the Fifties as a synthetic, lye-free bar, Dove’s popularity grew due to compelling, emotional components it tied into its marketing. “Dove offers to make consumers feel good internally, as well as look good. They trust that it will do that,” said Peter Waxman, Dove’s North American master brand director. Entering 2001, Dove touches more consumers now than in its 40-year history. It has products in the personal wash, deodorant, dry cloth, shampoo and lotion categories. “It comes down to the kind of connection we make with the consumer,” Waxman explained of Dove’s success. “That will make us successful in the marketplace.”
Of course, Dove relies on modern means to capture consumers, such as tapping into direct mail lists to find out what sensitive skin products consumers use, and then sending them Dove samples. Their extensive doctor-recommended program, which began in the Seventies, has grabbed consumers, too: 1 in 4 Dove consumers use Dove because their doctor recommended it.
But old-fashioned product innovation and innovative marketing is what Waxman said will lead Dove to outperform the categories in which it competes.
Part of that growth will come from the steady stream of recently launched U.S. products. Nutrium, Dove’s super-premium flanker brand priced approximately 30 percent more than Dove, expands from body washes to bars this month. Nutrium helped Dove evolve in more ways than one. “It has attracted a younger user and has broadened the Dove offering to real holistic skin care delivery,” Waxman said.
While sales of bar soap decrease, they still make up 70 percent of the personal wash category. Dove, though shaped like a bar, is not soap. This point of differentiation “drives consumers to continue their relationship with the brand,” Waxman said. From 1997 to 2000, Dove bar sales grew 34 percent, while the overall bar category was flat. And when the category’s sales fell last year, Dove grew 6 percent. This year Waxman predicts Dove will grow 4 percent, while the category will be flat.
Other categories, such as deodorant, are in Dove’s focus. Silk Protection, a soft solid that goes on as a creme, is now hitting shelves. Dove Daily Hydrating Cleansing Cloths have also entered the marketplace this year, capitalizing on Dove’s mild moisture cleanser and an exfoliating component.
Dove, however, makes identifying gaps in the marketplace its key competitive strong point.
In 1995, the opportunity to create a sensitive skin bar was pinpointed. “We found that half the population thinks they have sensitive skin. We said, ‘There is a mind-set here.”‘ Dove Sensitive Skin variant launched that year and now claims a 4.5 percent dollar share, larger than many other entire brands on the market.
Waxman and his team are currently evaluating several new U.S. categories, such as lotion. Dove lotion has been in the European market for a year and a half, where it capitalizes on an “all-day 24-hour hydration” message. But because Dove’s U.S. body wash positions itself with the same message here, another articulation is being explored. Jope also is exploring ways to expand HPC’s overall competitiveness. This year, he is bringing on board a chief information officer, a position not yet filled. A vice president of corporate affairs, Perry Yeatman, is slated to build the Unilever brand. And, there’s New Ventures, Unilever’s forward-looking component, which peers decades into the future. “Our business model of ‘We sell mass brands through mass channels using mass mechanisms of communications’ is successful, but ultimately is doomed. The world is fragmenting. People are demanding customization. If we want to grow, we have to think of whole new business models,” Jope said, although hardly alarmed.
He’s also open to developing new brands, or acquiring ones that fill HPC’s two criteria, white space and capability. “It has to take us into an area we are currently not in. We also have to be buying a capability that we currently don’t have.”