Business model of Unilever

Customer Segments

Unilever segments its business along the lines of product type. Each product type is aimed at a particular group or groups of customers, with some having a ‘premium’ line of brand for more affluent customers. It derives the majority of its sales (58%) from emerging markets.

• Personal Care – Personal Care targets both developed and developing regions through different brands. For example, Lux targets primarily developed markets while Lifebuoy targets developing markets. It also has region specific brands such as Citra, ostensibly for marketing purposes. Unilever has also started a ‘Prestige’ line of business within the Personal Care segment – it recently acquired four premium skin care businesses. This line is aimed at affluent consumers in developed countries
• Foods – Foods targets both developed and developing regions, and the brands are generally targeted as providing household items at reasonable prices with high quality. Examples include Knorr and Hellmann’s. Foods generates 40% of its sales from emerging markets – sales in these markets have been growing at 6.5%.
• Home Care – Home Care generates 80% of its sales in emerging markets.
• Refreshment – Refreshments include both household and premium brands that are targeted accordingly. For example, Lipton, the world’s largest tea brand, is marketed as a household item while Magnum is targeted at more affluent consumers (and is thus available only in more affluent countries).

Value Proposition

Unilever’s main value proposition is its branding as a provider of quality goods at reasonable prices. Its scale allows it to produce goods at relatively lower cost while maintaining quality. Its scale also allows access to niche markets, particularly in developing countries. This means that the same Unilever products may be found on shelves in the US and in provision stores on the streets of Thailand. This coverage gives Unilever a strong branding, driving sales.

That said, Unilever owns a significant number of brands, each with its own unique value proposition. For example, Magnum is known for providing quality ice-cream at premium, but not unreasonable, prices. On the other hand, Knorr is known for providing household items, such as stock cubes and sauces, at very inexpensive prices. The consistent narrative is that Unilever products are of high quality, are well designed and effective, and are provided at a price fitting their target customer and use.

Channels

Unilever uses a multi-channel approach, with channels depending on the region or country of operation and the brand being sold. For physical retail, it has trading relationships with centrally managed multinational customers, in developed regions, and small traders accessed via distributors in many developing countries.

Unilever also has an e-commerce platform in some countries, and deals with other e-commerce platforms in others.

Customer Relationships

Unilever relies heavily on culture-driven aspects of its product, i.e. its age, branding, and reputation, in order to sell its services to both retail and institutional clients – it owns 13 €1 billion brands, from Axe to Surf, and has over €17 billion in goodwill.

Well-known for its marketing prowess, Unilever maintains an innovative and adaptive approach to promoting its products. For example it heavily utilizes social media and digital marketing, particularly in developed countries, keeping track of changing digital habits to tailor their marketing approach accordingly.

It also takes a collaborative approach to marketing, using competitions and collaborating with social media celebrities and media companies – examples include All Things Hair, an online video channel that creates content in partnership with vloggers, and its partnership with Vice, a youth media company.

Key Activities

Unilever’s main activity is the production and sale of fast moving consumer goods.

Key Partners

Unilever’s key partners are suppliers upstream, and distributors and resellers downstream. Suppliers can range from large agriculture companies to smallholder farmers, and distributors and resellers can range from supermarket chains to distributors who specialize in small traders. It also partners heavily with media companies to maintain its marketing campaigns.

Aside from its key business partners, Unilever also partners with NGOs and IGOs in order to further its CSR initiatives. Some key partners here include UNICEF and DFID.

Key Resources

Unilever’s key resources are its built-up reputation, branding, and goodwill, and its properties, plants, human resources, and equipment.

Cost Structure

Unilever’s key costs are the costs of production (i.e. raw and packaging material and goods purchased for resale), staff costs, distribution costs, and selling and administrative expenses.

Revenue Streams

Unilever’s key revenue streams are from its four business segments. Personal Care accounts for a turnover of €20.1 billion, accounting 38% of the groups’ turnover and 48% of its operating profit. Foods accounts for €12.9 billion turnover, 24% of the group’s turnover and 31% of its operating profit. Home Care accounts for €10.2 billion turnover, 19% of the group’s turnover and 10% of its operating profit. Refreshment accounts for €10.1 billion turnover, 19% of the group’s turnover and 11% of its operating profit.