'Poverty Returning' Unilever Cuts Package Sizes in Euro Crisis
Consumer goods giant Unilever is now offering smaller packages to keep pace with the thinner wallets of its European customers. The company says the strategy comes from the developing economies in Asia and is vital now that "poverty is returning to Europe," as one manager says.
For all the negativity in Europe these days, the terms used in the euro-crisis debate have been surprisingly optimistic. Across the common currency zone, all anyone seems interested in talking about is a "solution" to the crisis while those public figures who would openly suggest that the euro zone might soon lose a member are roundly criticized. It has become bad form to wonder what Europe might look like if no solution is found.
For companies struggling to survive in the increasingly challenging European marketplace, however, there is little room for such niceties. Realism is the name of the game and some, such as the multinational consumer goods giant Unilever, have begun to adjust.
"Poverty is returning to Europe," Jan Zijderveld, Unilever's top manager in Europe, told the Financial Times Deutschland on Monday. As a result, the company has begun offering smaller, less expensive packages so as not to put too great a strain on increasingly limited budgets. It is, Zijderveld noted to the paper, a strategy the company learned by doing business in the developing countries of Asia.
"In Indonesia, we sell tiny packages of shampoo for two to three cents and still earn decent money," he says. "We know how to do it, but in the European boom years prior to the crisis we forgot."
Preparing for Leaner Times
Unilever is best known through the myriad popular brands it owns, including Knorr instant soups, Ben & Jerry's ice cream, Lipton teas, Hellmann's mayonnaise and many more. But it also owns several local brands that are only known regionally. In Greece, for instance, the company sells low-priced olive oil and tea under a local brand and also offers tiny packages of mashed potatoes or mayonnaise. In Spain, the company sells small packages of washing powder good for only five loads of laundry.
The strategy would seem to make sense. According to the most recent European Commission review of the employment and social situation in the EU, the share of households in the Europe saying that they are having increased difficulties making ends meet has shot upward since the end of 2011. Many of them are having to rely on savings or are taking on debt just to meet the requirements of day-to-day life -- perhaps no great surprise given the deep austerity measures implemented in crisis-stricken countries such as Greece, Spain and Portugal.
Unilever, of course, is not the only company trying to prepare for leaner times ahead in Europe. German exporters are focusing more heavily on doing business in developing countries in Asia and South America, giant multinationals like Shell are beginning to shy away from investments in Europe and banks on the Continent are avoiding anything that smells of risk and developing a more regional focus.
But for Unilever, the point is not so much to limit risk as to increase turnover even as consumers have less to spend. And it would appear to be working. After years of stagnation, the company's sales in Europe climbed by 1.1 percent in the first six months of 2012.