A Chat with Unilever's Niall FitzGerald
As co-chairman of Unilever, one of the world's premier consumer-products companies, Niall FitzGerald knows a thing or two about brands and selling. Until recently, Unilever looked to be in trouble, plagued by painfully slow growth, a brand lineup that was outdated and far too big, and an overly bureaucratic mentality in its ranks. Since taking the top job at the British arm, Unilever PLC, in 1996, FitzGerald has set out to change all that.
A total of $28 billion in acquisitions has souped up FitzGerald's brand lineup. At the same time, he has been shedding old brands, closing down plants, and slashing jobs. He's been trying to juice up Unilever's corporate culture by taking risks on younger executives and tying a big chunk of pay to performance. FitzGerald recently spoke to BusinessWeek's London Bureau Chief Stanley Reed. Here are edited excerpts from their conversation.
Q: How will the gloomy global economy impact on Unilever? A:
Q: How will the gloomy global economy impact on Unilever?
A:People will want to go back into stocks that are less likely to be...so sensitive to general macroeconomic reductions. People continue to eat and wash and, actually, [when] times are hard, we like to groom ourselves more to cheer ourselves up.
Q: How far along are you on restructuring? A:
Q: How far along are you on restructuring?
A:I think of it as a 20-quarter program. Next quarter with be the sixth of those 20 quarters. So far so good. We've hit all our key milestones. Our top-line growth of leading brands is accelerating quarter on quarter. We're ahead of the curve in terms of the brand-reduction program, rationalization, integration of the Bestfoods business, and synergies.
We've been doing a lot of what we call reenergizing the enterprise culture, in terms of reviewing our own leadership group. If you look at the top 100 executives today, 40% are different from who they were two years ago. [There are] more risktakers, more business-builders, people who have a passion for growth. We brought along a lot of our younger highflyers....The top 100 has 12 to 14 from Bestfoods, so that has changed the blend a bit.
[We've] put much more emphasis on real delivery and performance....We probably now have, certainly by European standards, one of the most aggressive reward systems in terms of being skewed toward performance....My ambition is that over the next two or three years every employee at Unilever will have the ability -- if they want -- to participate in stock options or stock schemes. I want them to be owners.
Q: Are you still sticking to the view that there will be no big acquisitions soon? A:
Q: Are you still sticking to the view that there will be no big acquisitions soon?
A:If something so unique and so unpassable came along, then we might have to think [about it], but that is not currently where we are.
Q: How many brands are you down to? [There were 1,600 in early 2000.] A:
Q: How many brands are you down to? [There were 1,600 in early 2000.]
A:We said at the end of the first quarter that we are down to around 900. There are another 250 to 300 already marked for disposal, so we are well on our way.
Q: Are you going to meet your growth targets? A:
Q: Are you going to meet your growth targets?
A:I'm confident [about] everything...so far.... [There are] two health checks. One is: What is the growth rate of the leading brands? And are they expanding as a proportion of the total business? By 2004, they need to [account for] 90% to 95% of our total business, and they need to be growing at 5% to 6% [a year]. They now [account for] 80% of our total business.
Q: How is Bestfoods doing? A:
Q: How is Bestfoods doing?
A:Broadly, where we expected it. Three things are important to measure early on. Did we get the quality of management that we thought was there and have we kept them? We targeted 60 people and 54 of those joined us, and they're of very good quality. The second is the synergies....We have now reconfirmed the synergy targets...
And the third is whether the brands have the quality and the legs that we assumed they had. And again we like what we see, particularly with the key brands. The jewels in the Bestfoods crown were Knorr, Hellmanns, their food-service business, and their business in Latin America. Those four were very important also in terms of [being complementary] with us.
The Hellmanns brand...represents a certain set of values for consumers that I think we can leverage a lot more out of. Ben & Jerry's is fine -- growing about 7% to 8%. We're taking it very carefully. Part of the cachet of Ben & Jerry's is that it's not a mass-market product. There is a tradeoff between going too fast to make it too widely available and losing its cachet. But it's now moving on a selected basis in some European countries and overseas.
SlimFast is also doing tremendously well -- growing at over 20% per annum, and that is before we [began] to take it outside the U.S. We have started in the U.K. and the numbers are already mind-blowing.
Q: Is the U.S. business large enough? A:
Q: Is the U.S. business large enough?
A:About $12 billion of our business is in the U.S. -- about 23%. It's evenly split between food and personal care....It's a very substantial presence. Would I like it to be bigger? Of course. I think it can get significantly bigger now through organic growth...
I don't set my store on bigness per se. It is being the best that is much more important. For far too long in the U.S. -- I go back to the 1970s and 1980s -- we were trying to get bigger without concerns of profits.
Q: How do you rate the competition? A:
Q: How do you rate the competition?
A:We take all competition seriously. One thing that I've learned in my years in the industry is never to underestimate competition, even when they seem a bit down....I don't like knocking competitors. The place to knock them is in the marketplace.
Q: How do you react to suggestions that the company should be split into food and personal care? A:
Q: How do you react to suggestions that the company should be split into food and personal care?
A:I'm on the record many times as saying I formally believe we and our shareholders get greater benefits from the combination of the business. That will become even more evident when we're down to the focused portfolio that we're after. We'll then have a basket of brand leaders across the globe that will be the most powerful and potent of traffic drivers to retail stores you'll find anywhere. We get significant benefits in terms of distribution or in purchasing in our relationships with the advertising agencies and so on.
If we're sitting here in four years time and we haven't achieved our target, it will be a perfectly legitimate question to ask again....I just believe, from a business point of view, this is a pretty lethal combination.
Q: Are you still interested in South Africa? A:
Q: Are you still interested in South Africa?
A:I am on Thabo Mbeki's international investment advisory council. I chaired the World Economic Forum's southern Africa summit in Durban [recently]. I have a strong commitment to Africa. We're the largest investor outside of the oil companies. We have the longest history.
And I'm not one of those despairers about Africa. I'm very hopeful about Africa. And I think it's at a pivotal moment when it could change very significantly. It has a new generation of leaders and a new commitment. [Not everywhere], yes, but it is growing a commitment to democracy -- open markets...liberalization, to sensible economic management.
Q: Can you tell me something about your background? A:
Q: Can you tell me something about your background?
A:I grew up in Ireland...Limerick. I went to University College Dublin. I didn't know what I wanted to do. I joined a shipping business. I fairly quickly came to the conclusion that I could not compete with Onassis. I went along with a friend to a Unilever interview. They asked if I wanted to be interviewed, then asked if I wanted a job. I started in 1967 and moved to London in 1971.
Q: I have heard rumors you were in the Communist Party? A:
Q: I have heard rumors you were in the Communist Party?
A:I was a member of my college Communist Party for a short period -- 12 months. There were two reasons: At 19 I had a fairly strongly developed sense of social justice. And if you really pressed me, I would also admit that the prettiest girls were in the Communist party at the time. But I don't regret it. It was a very interesting experience. But I've moved along the spectrum. I would be regarded as a slightly wimpish social democrat.
Edited by Patricia O'Connell