THE FIRST 100 YEARS OF JWT & UNILEVER 1902-2002: Unilever's Brand Guardian

Sir Niall FitzGerald is riding high. It is six years since he became chairman of Unilever and he is over halfway through a radical overhaul. He tells Amanda Hall about brands, JWT and running marathons.

It is a good job Sir Niall FitzGerald has the stomach and the mindset for marathons. In February 2000, when the Unilever chairman stood up in front of his shareholders and unveiled plans for the most comprehensive restructuring to hit Unilever in more than 100 years, there was a collective sharp intake of breath.

"It is about radical brand focus and portfolio change," the 57-year-old FitzGerald says, sitting in an airy meeting-and-greeting room at the top of Unilever House overlooking the Thames at Blackfriars Bridge.

A keen marathon runner, FitzGerald can occasionally be spotted running the four miles to the office from his home in Chelsea. Stamina, his shareholders concluded, was one thing the Irishman, who joined the business in 1967 and landed the top job in 1996, would certainly need to turn around Unilever.

"We were doing too many things," he says. "We had too many brands in too many places. Many were just not big enough to move the needle so we had to focus and simplify. That simplification would allow us to take cost out of the business."

While investors loved the sound of his promised margin increases from 11 per cent to 16 per cent, and target annual rates of growth of between 5 and 6 per cent from his top 200 brands, even his biggest fans questioned whether he could in fact pull it off.

"There were definite sceptics," one City analyst says. "We were talking about five billion euros of restructuring charges; think about what that looks like, it's bigger than most companies' market capitalisations. Could he even get everyone internally to buy into the idea?"

Turning round a global group which in 2001 raked in sales of 52 billion euros and employed more than 265,000 people would prove FitzGerald's toughest marathon yet. His "Path to Growth", as the plan is called, involves culling Unilever's unwieldy portfolio of 1,600 brand names down to 400 names which in turn represent 200 individual brands. Of these 200, 40 are genuinely global brands such as Knorr, Lipton and Dove, and 160 are what FitzGerald calls "local jewels", brands such as Persil, names with a leading position in a particular market but without global reach.

In 2000, these 200 brands accounted for 70 per cent of group sales. By 2004, they would make up 95 per cent of the business. Re-shaping the company would mean a massive 25,000 jobs would have to go, he told the City. Anticipated cost savings of 3.9 billion euros would generate funds to re-invest in the big brands, the drivers of growth on whose future Unilever would depend. All this, FitzGerald told investors, he would complete by 2004.

Over halfway through, how is he doing? His $18 billion acquisition of Bestfoods in the summer of 2000 - an unexpected move that brought the Hellman's and Skippy brands into Unilever - added a massive integration programme to the restructuring.

So is FitzGerald where he wants to be?

"Yes," he says."The first half of 'Path to Growth' was always going to be about restructuring, cost reduction and margin expansion. Halfway through, 70 per cent of that is done. Cost savings of 2.6 billion euros have already been banked and margins have moved from 11 to 15 per cent. As far as the leading brands are concerned, they now account for 88 per cent of sales and we've said by the end of the year that'll be 90 per cent."

Given the scope of disposals - factory numbers have reduced by 75 since the starting gun was fired - and the impact of Bestfoods, the critical figure which analysts target for an indication of whether FitzGerald's strategy is working is the growth rate of the leading brands. Today that stands at 4.5 per cent. Five to 6 per cent is the goal by 2004. "It's moving up," FitzGerald says. "And we're confident it'll get there."

Unilever has long been a business about brands, but when "Path to Growth" is complete, more than ever its fortunes will be inextricably linked to the health of its brands and in particular to the global 40. If they prosper, so too will the group. If they falter, FitzGerald will have no place to hide.

What then in his view is the key to brand success and longevity? "First, it's vital to understand that the brand belongs to the consumer, not us," he says. "If we ever forget that, we're in deep trouble. Strong brands have to meet a fundamental need, either functional or emotional, and they are a storehouse of trust. If you lose the trust of your consumer, you lose your brand."

FitzGerald, it should be remembered, is the man who was in the hotseat during the 90s Persil Power debacle. He is also the man who said "No, not yet" to his marketing people at Dove when they wanted to move the brand into new categories such as shampoo.

"We'd launched Dove in 60 markets in two years in the early 90s and it took off like a train. But we had to establish its equity in the moisturising and care arena before moving to other categories. You have to be very ambitious about the brand but very disciplined in the way you expand it," he says.

"Brand-building is like a relationship; you need to work at it all the time, it just doesn't float along. If you're not constantly working at it, seeking to understand what the other side in the relationship wants and thinks, that relationship will disappear."

FitzGerald is a big fan of consumer interaction over market research reports. "You will not meet a global consumer," he says. "Because there aren't any." On a recent visit to Indonesia, he spent half a day in four Indonesian homes in a bid to show his marketing people what they should be doing. In India, the company has a rule that before any marketer can speak at a meeting, they must have notched up 100 hours of "direct consumer encounters".

Elsewhere, brand managers spend a day a month in stores, helping with stocking and merchandising and in one country trainees spent six months living with a family in remote, rural areas; some don't make it, FitzGerald says. All this is part of Unilever's "reconnecting with the consumer" programme.

"The vast majority of marketing managers are urban, middle class professionals. The vast majority of our consumers are not. You have to really love your brand and be interested in consumers. What is it that makes them do things?"

Unilever has five aligned agencies: as well as J. Walter Thompson, the group works with Lowe, McCann-Erickson, Ogilvy & Mather and Bartle Bogle Hegarty. Quizzed on the criteria for aligned agencies, Unilever's chairman reels off a long list of must-haves. "They need to be brand stewards with high creative standards, global capacity, cultural compatibility and be preoccupied with big, enduring, well-loved brands. They must be prepared to go for big ideas that take risks and bring extraordinary value. Little ideas are no good to us. And these big ideas must endure and stay contemporary," he says, citing the Persil campaign as an example. "It's not about washing at all, it's about your Mum caring for you."

And how does he explain the longevity of the Unilever/JWT relationship?

"They are a big ideas agency," he says. "Their ideas are not ephemeral, they're real and meaningful and they bring a human tone, a human face to their advertising. Their production standards are very high - if a brand is to endure you can't play games with quality.

"Lots of agencies come up with good ideas, with jingles and lines, but consistently JWT have come through with great writing. Great - not necessarily fashionable - but great writing. For me that is what makes the difference."

Going forward, Unilever's biggest growth sector is likely to be personal care. Geographically, developing markets (outside Europe and North America) which now account for a third of sales are on track to make up half the business in ten years time. And in terms of consumer trends that will influence product development, six have been identified as critical. They are: the growth of connectivity; the desire for individual - not mass - solutions; better health; instant availability; concern for the planet; and the transformation of traditional structures.

Integral to all of this, of course, is brand marketing. While marketing spend will rise from 13 per cent of turnover before the restructuring to 15 per cent afterwards, the changed media environment has presented opportunities. Unilever's four-year £320 million media buying deal with Granada and Carlton - estimated to have brought a 25 per cent price reduction - is one example. Another is the move to concentrate media buying in the hands of two agencies, MindShare and Initiative Media; previously the group used 30 different media buyers.

And third is Unilever's decision to pay its agencies on a fee-plus-incentive basis rather than straight commission. "We put a number of brands on that basis in 2001, more have come on in 2002 and we'll move further in 2003," FitzGerald says.

"This has been difficult for some of the agencies but I've said: 'If you really have confidence in your ability to deliver outstanding advertising that sells products, you'll get two bites at the cherry.' I'd expect in a matter of a few years we'll have everyone on a fee-plus-incentive basis."

FitzGerald is one of a handful of British businessmen seen as able to cut it on a global stage. Knighted in last year's New Year's Honours, he is on the boards of Merck and Ericsson and despite dwindling support for the euro among the business community, he is still vociferous in his support. At the end of 1996, the year he became chairman, Unilever was valued at £28 billion.By 2001, it was at £39 billion.

There is no doubt, however, that "Path to Growth" is his biggest corporate challenge to date. So far, investors like what they see. Shares have risen from around 340p when he made public his plan to 568p today.

"Halfway through we've hit all the key milestones," he says."What you currently see would largely have happened by honing the portfolio down.

The next stage is focusing on areas of strength - on personal care, on developing markets and on the 40 global brands."

In the past two years, FitzGerald has also acquired businesses. As well as Bestfoods, there was Ben & Jerry's and Slimfast. "That's it for now," he says quizzed on whether more deals are likely. "The business of portfolio management never stops, but for now we have everything we need - a unique basket of brands capable of delivering growth."

For his sake - and that of investors and Unilever's quarter of a million staff - let's hope he is right.

THE FITZGERALD FILE

Job Title: Chairman, Unilever

Age: 57

Homes: Chelsea, London and Spain

Family: Separated, four children University University College, Dublin

Favourite book: Wittgenstein's Poker by David Edmonds and John Eidinow

Favourite film: Casablanca

Favourite TV programme: "Don't have one"

Favourite JWT TV ad: "The 1990s' Persil ad"

Favourite JWT poster ad: "Mrs Monet's washing ad for Persil"

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