Introduction
I am delighted to have the opportunity to speak to the Annual Convention of the Institute of Grocery Distribution - for two reasons in particular.
First, on a personal note, I am doing so under the presidency - and the watchful gaze here today - of Iain Ferguson. Iain had, as you know, a long and distinguished career at Unilever and is a good friend. There can be few people in the food business with a better grasp of some of the key issues that we face today than Iain. My second reason is one of which Iain would approve. It gives me the opportunity to deal with some of the big challenges we face.
In many respects the UK food industry is a shining example to the rest of the world. The range, quality, and choice of products it offers to the consumer is quite remarkable and would have been unimaginable even ten or twenty years ago.
For anyone brought up in the fifties, as I was, we have gone from the age of Mother Hubbard to Aladdin's cave.
Industry challenges
At the same time it is becoming increasingly clear that the apparent tranquillity of this land of plenty is deceptive. Many of the difficulties faced by the industry are well known - the precarious economic position of small farmers; the flawed nature of the Common Agricultural Policy and its damaging effects on the developing world; the arguments over the introduction of GM and functional foods.
Other challenges have remained below the surface but are now erupting into life. Health and nutrition, obesity, and the advertising of food and drink to children are examples. Many of you will have seen the recent Food Standards Agency (FSA) report into advertising to children.
Amongst all the media furore that followed, did you see any reference to the fact that advertising to children is already governed by a strict code administered by an independent body? I thought not.
But whatever the rights and wrongs, interest is already huge and still growing. I recently saw an analysis which tracked the appearance of these issues in the media. Over a six-month period the amount of coverage had easily quadrupled.
Take another measure - the number of parliamentary questions asked about them. There are about one hundred parliamentary questions per month on food and health issues at the moment. That is about double the number of a year ago. So when I took as my subject today, 'Understanding People to Build Brands', I did so because I wanted to deal with the subject in three ways.
First, understanding consumers as shoppers, and the way in which manufacturers and retailers can work together to develop brands which meet their needs in ever more relevant ways.
Second, I want to touch on how we in Unilever are trying to grow our people so that they can grow our brands. This is all about unlocking their creativity and enterprise.
Third, I want to talk about the way in which, as an industry, we engage with issues that people raise as citizens who are, of course, also the consumers of our brands.
Here I don’t believe that we have been responsive enough or fast-moving enough to cope with the pace of change. I will turn later to what I believe we need to do.
Working together
Let me start by reiterating that the food industry in which we all work is a great success story. We are the biggest manufacturing sector in the UK with a turnover of over £60 billion, employing half-a-million people. Our exports are worth nearly £9 billion per year. Our overall contribution to the UK economy is immense.
A distinctive aspect of this success is the close working relationship that exists between retailers and manufacturers. I can see some wry smiles in the audience - on both sides of the fence - no doubt recalling some epic battles over margins, payment terms and service levels!
These differences will always be with us, and while they might be bruising from time to time, they do mean that we continue to supply UK consumers with choice and quality at extremely competitive prices. It might not be a cosy partnership, but it is certainly co-operation to a common end - meeting consumer needs and growing the market.
It is striking how unusual the UK is in this respect, at least compared to the position elsewhere in Europe, where hostility or mutual incomprehension often seem to characterise retailer/manufacturer relationships.
Understanding consumers
The importance of co-operation for successful food retailing is profound. We can only continue to build and create new brands by using our combined understanding of the consumer to find solutions that satisfy her ever-changing needs.
We used to think of the choice of a brand in a rather one-dimensional fashion - the typical consumer, in a typical supermarket, doing a typical once-a-week shop.
We now have to face the uncomfortable reality that the choice available to people shopping for food is so rich and wide that the decision making process is inevitably much more complex.
We in Unilever are very alive to this challenge, which is why we have launched a project across Europe to develop a more rounded understanding of the consumer as a shopper. The project will break down the shopping process into its component parts, starting with the thought given to the task before leaving home, then to the choice of store right through to the retail experience and the ultimate choice of brand.
This kind of research is not new. However the unique value that Unilever can add is to understand shopper behaviour across a broad range of categories. Our brands are in many aisles of the supermarket stretching from food, beverages and ice cream through to household and personal care. We will also be able to synthesise data from across Europe and identify the similarities and differences in shopping behaviour across different countries and food cultures.
This project is in its early stages, but once it is complete, we will share the information with customers in order to drive sales to our mutual benefit.
Retailer own brands
One of the most obvious ways which the UK grocery trade has led the world is in the development of retailer own brands. It would be hypocritical of me to say that this is an idea which I have welcomed with open arms.
However I would be the first to acknowledge that the development of what we in Unilever used snootily to refer to as 'DOBs' (distributors' own brands) is one of the most significant and enduring achievements in marketing over the past 30 years. Their transformation from their original incarnation as 'me toos' of manufacturer brands, to the high quality, well branded ranges which we see today is a powerful testament to the spirit of innovation which exists in UK food retailing.
It is also a development that keeps major brand custodians like ourselves on our toes. To succeed in the marketplace our brands not only have to win the battle for consumer preference against the best from Nestle, Kraft, Procter and L'Oreal but they also have to earn the right to sit alongside Tesco Finest, Asda Extra Special or the Taste the Differenc range from Sainsbury's.
How we do this is what exercises me and my management team 365 days of the year.
Sometimes real consumer advantage can come from proprietary technology. Brands like Dove bar or Flora pro-activ are not easily copied. These are the exceptions rather than the rule, but this is changing. For the most part it is our brands that have to provide the differentiation which will attract the consumer’s eye. Differentiation which is both functional and emotional!
Developing & growing our brands
This brings me to my second theme, which is how we try to unlock the creativity in our people that will allow us to develop and grow winning brands.
Unilever has a lot of brands. Indeed we had too many. At the end of the 1990s the company was marketing some 1 600 brands around the world. A key part of my mission in the last few years has been to reduce that portfolio as part of our Path to Growth strategy. We have now reduced this number to less than 600 and intend to go further. Indeed, we now have less than 40 global brands, which account for two thirds of our turnover, and 14 of these each have sales of over $1billion.
Having too many brands is neither good for retailers nor for brand owners. On our side it involves a diffusion of thinking, promotional effort, advertising and all the other aspects of brand ownership. For retailers it is a waste of valuable shelf space when a clearer offering would have much more impact with the consumer.
The progress we have made in rationalising our portfolio of margarine brands in the UK is a case in point. Over the past 4 years a number of brands which I grew up with - Krona, Delight, Blue Band, Summer County and now Olivio - have either been migrated into other brands or taken off the market. This has simplified our supply chain, allowed our customers to reduce the space they devote to this category and most importantly of all, clarified the offer to the consumer.
Importance of brands
Brands are at the heart of our Path to Growth strategy. By reducing their number we are not implying that they are less important in today’s marketplace - absolutely the reverse.
There was a good deal of comment some time ago - prompted by Naomi Klein's 'No Logo' book and by the views of the anti-globalisation movement - that the age of the brand was dead. We have heard less of this argument recently, which is a reflection of how profoundly foolish it was.
Let us remind ourselves of why brands existed in the first place. When William Lever began marketing soap in Victorian England, he offered a guarantee of quality and consistency. Customers were prepared to pay for that assurance at a time when trading standards legislation offered them very little protection. The brand became a storehouse of trust: "this brand will always give me what I expect and work hard to adapt to my changing needs."
In the developed world we are so used to this aspect of brands that we tend to forget it: but the consumer need to have a product which 'does exactly what it says on the tin' is just as important in 2003 as it was in 1903.
New brands, like Fairtrade, which make specific promises about the product and its ingredients, are simply developments in a long history of brand development. The values which underpin them are very similar to our own Ben & Jerry's, which in many senses is a 'campaigning', 'cause related' brand.
There are also 'anti-brands' which claim to be based on a rejection of the whole brand concept. I saw with amusement that the No Logo logo - if you follow me - became a brand in its own right. There is also a training shoe whose whole identity is based on it not being made by Nike. Imitation is the sincerest form of flattery!
While we can laugh at the silliness of it all, there is some food for thought here. Whatever the anti-brand, anti-globalisation movement might think there is clearly a deep need for brands amongst consumers everywhere.
Since it is people that grow and develop brands the question which we are constantly wrestling with is how to liberate the creativity and imagination inside our R&D and marketing teams that will enable them to conceive, develop and nurture enduring and distinctive brands.
In my view there are at least 3 dimensions to the answer: consumer insight, risk taking and diversity.
Consumer insight
At the heart of all successful brand development is consumer understanding. Consumer understanding is a much harder nut to crack than conventional market researchers are ever prepared to admit. This is largely because consumers can't or won't tell us what they want. Very often this is simply because they just don't know.
Let me illustrate. Ten years ago, all available research said that people wanted cars that were small, nimble, well-designed, easy to park and fuel efficient. But Chrysler made jeeps. And even their research suggested that the potential for off-road vehicles in suburban surroundings was very small. But then the SUV caught on! And soon every manufacturer realised what no market research could have told them: that people really liked sitting up high above the traffic in a five-litre meat-machine with bull-bars - even when they were dropping their kids off at school in Surbiton.
As brand providers we need to anticipate; get ahead of the curve. Don't just take our brands to where the consumer is. We need to place the brands where the consumer is going to go. The best brands are like magnets that attract people to them. They have a point of view that sets them apart and places them one step ahead of the others.
So the secret is not consumer research - or even consumer connection. We must strive for consumer intimacy. Because intimacy means knowing someone so well that you know what they want - and what they feel - even before they know it themselves.
Thus it's clear that this is not a mechanical process. It's an art. You could have two people listening to a consumer group. One could come out and tell you what the consumers said. The other might come out and tell you what they meant, what they felt, what they wanted.
It’s this ability to turn intimacy and insight into a compelling brand proposition that is the alchemy. The magic process of turning base metal into gold.
Taking risks
For this to happen people must feel confident about thinking broadly and imaginatively and be given the scope to take risk, and the room to fail.
Unilever serves the everyday needs of people everywhere. We have a global scale of operations - 150 million people daily choose our brands. As I speak, there is at least one Unilever brand in half the households around the world.
That scale can be a weakness, creating an elaborate and suffocating bureaucracy in which everyone is second-guessed and is frightened to break the mould. That is the way most large organisations naturally go if left to themselves.
Or we can work - and it does take work - to ensure that organisational sclerosis is kept at bay.
We will never be perfect, but I believe we have some of the essentials in place to do that.
In the first place, the message from the top is clear. Take risks, push the envelope, and if sometimes something goes wrong then learn and move on.
I cheerfully admit that in my Unilever career I have made many mistakes - some of the people here whose underwear was shredded by Persil Power will remember some of them. Luckily for me the Unilever leadership at the time recognised that part of the growth of any leader who has the courage to take risks is also to learn how to work through the consequences of failure.
That is not an excuse for poor performance, by the way, but it is a recognition that if you want people to take risks and push at the edge, you must be tolerant of occasional failure, seeing it as an opportunity to learn and test resilience.
Take another example. Eyebrows have been raised about the way in which we advertise some of our youth-orientated products, such as Lynx and Pot Noodle. For the teams working on these brands it is their job to develop edgy, iconoclastic communication that strikes a chord with their consumers. It is my role and that of my top management team to provide a culture which is supportive of this risk taking but at the same time has the courage to step in when there is a danger of us causing unnecessary offence that might tarnish our overall corporate reputation. There is a very fine line between the "slag of all snacks" and being regarded by opinion formers as an irresponsible 'corporate slag'.
Diversity
Another key driver of successful brand stewardship is diversity. Back in 1978 only 1% of Unilever's senior managers were women. Now it is 25%. That is one aspect of diversity where we are making progress. Another is the ethnic diversity which has always characterised Unilever. Take my own executive team. This is composed of 8 individuals drawn from 6 different nationalities. Our top 200 leaders represent over 40 nationalities.
However we still have much to do on the diversity agenda. That is why in the UK all the heads of our operating companies and our UK chairman Richard Greenhalgh have committed themselves to a diversity charter which is driven by a diversity board with representatives from all constituencies in the company. And we are committed to diversity of gender, race, creed and style.
We do not do this simply because it is fairer that way - although it is.
Our brands have to appeal to people from a wide range of backgrounds, ethnic origins, traditions, customs and opinions. That's what makes a true world-class brand in many ways - the ability to transcend the here and now and speak to people on their own terms. It is a hell of lot easier to do this if those who are managing the brand have an instinctive and diverse feel for the consumer.
In a global corporation like ours, another area where diversity is critical is in the need to understand local market sensitivities. We act with a global reach, but in each market we try to have a local touch. What does that mean?
It means, fundamentally, that we come to market with sensitivity. We recognise and welcome the fact that there are some brands whose basic propositions are so universal that they work well in almost every market. However we will not hesitate to tailor the recipes or formulations of these so called global brands to suit local market conditions. Dove, shampoo for example will have different ingredients in say Thailand compared to Ireland to take account of the specific characteristics of Asian and Celtic hair.
All big brand custodians - ourselves, Kraft, Coca-Cola - struggle with this problem. There is no 'right' or final answer, because markets and people change. But in Unilever where we describe ourselves as being a multi-local, multinational it is a constant preoccupation to get the balance right between on the one hand the economic benefits of global scale, and on the other, the marketing advantages of optimal local tailoring. We strive to be neither mindlessly global nor hopelessly local.
To achieve this requires a deep understanding of the local cultures and traditions in which we operate around the world and a respect for difference. Diversity is the key to this understanding.
The consumer as citizen
Finally I would like to come to my third theme, which is how we address the needs of the consumer as citizen and in doing so fulfil some of our wider responsibilities to society. I will do this with reference to some of the challenges with which our industry is confronted in the UK. None of us can ever afford to lose sight of the fact that our consumers are citizens who live in communities where they are seeking a better life for their children.
Increasingly all large organisations are faced with pressure groups and regulators which challenge the sustainability of the way we do business - anything from our relations with primary producers, food miles and environmental impact, and the effect on people’s health of our products.
We cannot run away from these issues, and we cannot simply say that everything is a matter of personal choice and that we have no responsibility other than to provide that choice.
Nor must we give the impression that there are simple answers and we can deliver them. The tendency to say 'ban this', 'prohibit that' in response to all sorts of issues has recurred throughout human history. It never works.
What we have to do, as an industry, is work with all stakeholders, and bring our knowledge of consumers - which only we really have - to the table at which policy is made.
In other words, we must both acknowledge our corporate responsibility to play a part in these issues, and use our knowledge of consumers to show that neither we nor anyone else control their behaviour.
Sustainability
We must however, work to address genuine issues where we have influence. One of those is sustainability. Unilever is committed corporately to sustainable development, even though it is not an issue that has attracted much consumer interest so far. We have well developed programmes engaged with sustainable agriculture, fisheries and water. This is about survival! Without the outputs from agriculture and fisheries, we cannot make our produce. Without clean water, none of our products, whether food or household, can function.
But now we have begun a programme to look at sustainability as a potential part of our consumer marketing activity in partnership with Forum for the Future. It is too early to guess the results, but our judgement is that this is an issue which will preoccupy the consumer of tomorrow more than the consumer of today.
The food & health debate
The food and health debate requires an industry response. As Benjamin Franklin told the American revolutionaries: "on this we must indeed hang together, or else we shall most assuredly all hang separately".
The long-term threat of unnecessary regulation (for example of advertising) or litigation on the tobacco model are clear. Either would harm our business, damage our reputation, and achieve no social good whatsoever.
Our united response must be to work with the Food Standards Agency and the government to ensure that we meet the increasing aspirations of people to have a healthy balanced diet and which helps rebuild trust and confidence in food.
We can only do that through an adult dialogue with consumers as citizens. Part of our role, in other words, must be education and awareness.
Salt is a case in point here. We in Unilever are leading a campaign to make reductions in the sodium content of many our products. We have formed an alliance with other food producers, such as Heinz, Masterfoods and Campbells to gradually reduce the salt content of our soups and meal sauces. Collectively we have committed ourselves to reduce by 10% this year and (depending on consumer acceptance) 10% in 2004. This follows a significant reduction across the whole of the Birds Eye range and in all of our margarines.
I have to say that it has proved less easy to bring some retailers - although there are praiseworthy exceptions - into our coalition, despite the clear emphasis being put on the issue by the FSA and the Government.
As an industry we have to be prepared to take a lead in this kind of issue. It is important to the long-term health of our nation and the consumers that we serve. The scientific evidence linking salt to hypertension and certain types of coronary heart disease is unambiguous, as is the knowledge that most consumers find it hard to navigate their way through labels to come to an idea of whether their salt intake is appropriate or not.
We may compete on price - and we do. We may compete on quality - and we do. But there are occasions when competition has to give way to a clear moral responsibility.
My challenge to everyone in the room today is to work with us and the other companies which are taking a lead in order to reduce the salt content across the whole of our product ranges, and to ensure that consumers have the necessary information to make informed choices.
Conclusion
The food industry in the UK has nothing to be apologetic about. We have provided even people of modest means with a choice and variety of brands that has existed in no equivalent generation at any time in Britain. We have also done much to contribute to higher nutritional standards.
Our great strength is our knowledge of what the consumer wants. Special interest groups will always urge us to chop and change to meet their agendas. We can work with them and learn from them, but not be driven by their narrow interests.
One of the distinctive features of doing business in Britain is the spirit of partnership which exists between retailers and manufacturers. This is precious and should be preserved at all costs. By working cooperatively we can better address the needs of the consumers which we both serve. We will also be stronger in dealing with the external pressures which are bearing down on the industry and will only accentuate over time.
If we strive at all times to better understand the people - consumers as citizens - who build our brands, and work in a spirit of true partnership to meet their different and changing needs, we will be able to look back after another 20 years at a growth in prosperity for all - supplier, retailer and consumer.
