By Saabira Chaudhuri
LONDON-- Unilever PLC, the home of mass-market brands like Dove
soap and Hellmann's mayonnaise, also wants to be known for $85 pots
of mustard, $45 tins of tea and $15 tubes of toothpaste.
From opening boutique-like stores in London and Paris to
acquiring an artisanal ice-cream company, the world's
second-largest consumer-goods company by sales is pursuing a
carefully crafted effort to push more high-end products in Europe
and North America. Unilever reasons that the mass markets in these
regions remain constrained, and the outlook for emerging markets
sluggish.
"It's the premium market segments that are still growing faster
than the midprice ones in many parts of the world," said Chief
Financial Officer Jean-Marc Huët at a conference in December.
Although the move is relatively small for the EUR48.44 billion
($53.23 billion) company, any boost would be welcome: Unilever's
revenue slumped 2.7% in 2014 from a year earlier.
Since March, Unilever has acquired four premium skin-care
brands--Murad, Dermalogica, Kate Somerville and REN--that sell at
drugstores and specialty-retail locations like professional salons
and spas. Last year, the consumer-goods giant created a prestige
division, which sells high-end cosmetics and personal-care
products.
On a warm recent afternoon, Unilever's Maille mustard store just
down the street from the Ritz hotel in London's Mayfair district
was buzzing.
At the "taste bar," shoppers could sample a mustard made with
the French sweet wine Sauternes--and they could take home a roughly
pint-size, lime-green sandstone pot of it for GBP55, or about $85.
Other flavors included candied orange peel and ginger, lemon and
harissa, and pistachio and orange. Unilever has Maille (pronounced
MY-yuh) stores in Paris and New York as well.
Elsewhere, in London's trendy Shoreditch neighborhood, shoppers
at the company's T2 store browsed more than 200 varieties of tea in
brightly colored boxes, stopping by aroma tables for a sniff or
tasting stations to sample a blend. Strawberries-and-cream tea cost
GBP18.50 (about $29) for a 250-gram tin, while Pai Mu Tan tea would
set sippers back GBP30.
In December, Unilever bought artisanal ice-cream maker Talenti,
whose flavors include sea-salt caramel and Sicilian pistachio.
Unilever has been expanding its high-end portfolio at a time
when bigger rival Procter & Gamble Co. is paring its footprint
as it looks to focus on core brands. Last week, P&G agreed to
sell much of its beauty business, including areas such as salon
products and designer perfumes, to Coty Inc. in a $13 billion
deal.
There is a gamble to pushing upmarket. While Unilever is adept
at selling large volumes of midprice products to middle-class
consumers, particularly in emerging markets, the jury is still out
on whether it can conquer a more-premium customer in the developed
world, said Jefferies analyst Martin Deboo said. "It's different
channels to market, it's a different way of thinking," he said.
But Unilever is limiting its risks by making small, targeted
acquisitions, said Berenberg analyst Fintan Ryan. "They're not
moving into cosmetics or colors; they're focused on skin care and
on the more medical elements of it rather than the beauty end,
which is a more discretionary purchase," he said.
Unilever has already been through much of the restructuring that
P&G is embarking on, in 2005 selling its fragrance business to
Coty for $800 million, including the perfume licenses for Calvin
Klein and Vera Wang. At the time, then-Chief Executive Patrick
Cescau said the company wanted to focus on its core categories.
Unilever sold Elizabeth Arden, a cosmetics and fragrances unit, in
2001.
Overall, the company has been shifting its portfolio toward
personal-care brands, which tend to carry higher margins, and away
from its slower-growth food business. Some investors are looking
for more radical action, like a sale of Unilever's spreads
business, which it said late last year it would split off into a
stand-alone company but continue to fully own.
Under CEO Paul Polman, who took the reins in 2009, Unilever has
steadily increased revenue, but margins in its home-care and
refreshments units have been narrower than those of rivals. In
response, Unilever has turned to adding more features to its core
products and in some cases has pushed into more-upmarket segments,
which typically carry fatter margins.
"Maxing the mix is more relevant today than ever before,
specifically in a lower-growth environment," said Mr. Huët in
December.
The company even has taken its older frozen-confection brands
upscale with products like Ben & Jerry's Cores--pints with a
center of fudge, caramel or raspberry jam surrounded by ice
cream--and Breyers Gelato, which comes in flavors like strawberry
truffle and tiramisu. Innovations, according to Unilever, bolster
its gross margins 75% of the time.
The company's North America president, Kees Kruythoff, in
December said the premium part of its refreshments arm is "growing
significantly ahead of where the rest of the portfolio sits."
Unilever is also working to add some allure to its core Dove
brand, recently launching a new oxygen-moisture hair-care range to
add volume to flat hair, and deodorant that help the skin repair
itself from shaving damage.
"Consumers, even if hard-pressed in developed markets, are still
ready to pay for more real, differentiated innovation," said Mr.
Huët.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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