Unilever’s Supply-Chain Diet

You know Unilever. It sells products that 150 million of us use every day to wash clothes (Wisk, All), wash bodies (Dove, Lever 2000), dine (Ragu pasta sauce) and diet (SlimFast drinks).

No. 1 in home- and personal-care items, and second to Nestlé in foods, the $47 billion Unilever makes more than 900 brands of products sold in 150 countries. It’s big. Arguably too big. Although its sales are higher than, say, Procter & Gamble’s, it has nowhere near that rival’s profitability.

But Unilever is a rare case. It’s a company that not only realized it needed a kick in the pants, but has administered said kick.

It’s true that Elizabeth Arden perfumes, Golden Griddle syrup and many other items weren’t selling like they used to. But the larger problem was that Unilever, with its 300 operating companies worldwide, had become diffuse and unwieldy. Nearly every brand acted like a separate company, with its own manufacturing facilities, supply chain and order management system.

That made it complicated for department stores, drug chains and supermarkets to place orders—and for Unilever to fill them.

When Wal-Mart, for example, ordered three or four or 15 different Unilever products, three, four or 15 different trucks would roll up on three, four or 15 different delivery schedules. It was inefficient and kept freight and warehouse costs needlessly high, says Chuck Irwin, director of transportation at Unilever’s Home and Personal Care North America (HPCNA) division, in Greenwich, Conn. “Our customers came to us and said, ‘Please, get around to managing your businesses as one,’ ” Irwin says.

In 2000, the company launched a four-year plan to do just that—and to remake itself in other ways. Under the so-called “Path to Growth” strategy, Unilever first reorganized into two units—foods and nonfoods—in each major geographic area. Irwin’s HPCNA group, for example, handles Unilever’s soaps, detergents, lotions, shampoos and other nonfood products in Canada, the U.S. and Mexico. It had an estimated $5.5 billion in sales last year, or 12% of Unilever’s total revenue.

Path to Growth also calls for Unilever, by 2004, to cut its collection of brands to 400, from a high of 1,600 two years ago. That core of 400 strong sellers—which includes SlimFast, Dove, Ben & Jerry’s ice cream and Lipton tea—is expected to make up 90% to 95% of Unilever’s total sales, up from 84% today.

So far, 700 slow-moving brands, plus an incongruous industrial dry cleaning business, have been sold. Five hundred more are still to be divested, including a group of oils and spreads put up for sale last month. (Judging from its stock performance, Wall Street, overall, has approved.)