Opinion: Perspective - Unilever's Path to Growth has stunted its marketing

It is more than a coincidence that as Unilever has seen its margins slide and profits weaken, it has also become the advertising client that so many agencies find frustrating to work with.

The company saw 5 per cent knocked off its share price this week as it issued a profits warning and admitted it would not meet its promised double-digit rise in underlying earnings per share. It was, one chief of a Unilever agency network commented, the home-to-roost result of squeezing international agency relationships and compromising marketing initiatives with a new nervousness.

Of course, there is more to Unilever's financial woes than cutting marketing corners. Blame the unspectacular summer for poor soft drink and ice-cream sales. Blame the successful discounting strategies of rivals such as Procter & Gamble. Blame increased retailer muscle. Blame the success of own-labels.

But blame must fall, too, on Unilever's Path to Growth strategy. Path to Growth was designed to focus on core brands that would form the foundation of Unilever's future. But it became a revenue-driving, profit-margin boosting, sales-bolstering corporate tenet that proved a distraction from investing in those core brands. And its impact on Unilever's approach to marketing has been harsh, with budgets muted and agency relations, particularly on the big international accounts, strained to the point where creativity and delivery have been compromised by a general nervousness about marketing decision-making.

When Patrick Cescau, Unilever's in-coming chief executive, said this week that the company would now be "putting the long-term health of the business ahead of short-term financial targets", it was implicitly a recognition of a marketing cliche: the need to continue investing in brand communications even when the economic climate is unsympathetic. So now the company's cost-cutting programme is being flogged harder to fund a new round of spending on marketing and communications.

This is good news for Unilever's agencies, but Unilever has more ground to make up than simply a marketing budgetary one. Take my brother: a father of three and, pertinently, the man in charge of UK banking in the government's insolvency division. He is typical of the new breed of cost-conscious shopper with whom Unilever increasingly has to contend. His weekly shopping is done at his local Aldi store. You will probably never have heard of his brand of coffee, loo roll or beans. But they do the job and for a lot less than the big brands.

The big FMCGers are caught between the need for major investment in brand-building and price promotion if they are to attract this sort of consumer and hold their ground against the retailers and own-label competitors.

But price promotion is dangerously short-term unless it is matched by a significant financial and intellectual focus on brave, creatively led brand communications. Unilever's promised new investment must be in big, bold brand ideas that work in mass media, in-store and in everything in between.

Unfortunately, though, the light has probably been seen too late to influence the current half-cocked Unilever European media review. The review was designed to slash £40 million from the company's media spend. Hopefully, it will be the last great example of Unilever's short-sighted pursuit of dramatic cost-cutting rather than real investment in building brands through smart, effective marketing communications.

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus