ENGLEWOOD CLIFFS, N.J. -- It shouldn't take long for a visitor to the Unilever Bestfoods North America headquarters here to notice two things about the offices.
Sitting right in the center of the operation is a large test kitchen used for product development and demonstrations, often using celebrity chefs. And positioned in the middle of the sales department is a just-opened model retail store that simulates a real supermarket environment used to explore concepts and hold discussions with retail customers.
The kitchen is a reminder that the company made its name with an innovative food culture, and the store represents the paramount importance of the retail environment to the company's business.
"We're really trying to make this company externally focused against our [retail] customer and our consumer and make us all realize who we work for," said Art Drogue, senior vice president, sales and customer development, during an SN interview here. He was joined in the interview by Matt Shattock, senior vice president and chief operating officer, who leads UBFNA's marketing efforts.
The company is re-emphasizing its commitment to consumers and customers at a pivotal time in its development. UBFNA, a unit of Anglo-Dutch consumer products giant Unilever, is in effect reintroducing itself to the industry following its formation in a merger and a subsequent period of integration. The company's core message to retailers speaks to the dynamics of today's retail landscape. UBFNA is emphasizing its ability to deliver increased value with its large portfolio of brands and products at the very time when larger retail organizations need partners with more scale and innovative capabilities to breathe new life into mature grocery categories.
UBFNA, headed by Neil Beckerman, business group president, was formed following parent company Unilever's acquisition of Bestfoods in October 2000. It is part of a North American organization that posts annual sales of about $12 billion. That breaks down into roughly $6 billion for UBFNA (including affiliated food brands) and $6 billion for sister organization Unilever Home and Personal Care. On a global basis, parent company Unilever's sales are $49 billion.
The Unilever and Bestfoods merger brought together an all-star roster of major brands under one roof. These include Lipton, Ragu, Hellmann's/Bestfoods, Shedd's Country Crock, Wish-Bone and Bertolli. The product assortment is spread across numerous categories including savories, dressings, teas, and spreads and oils. Most of the products are merchandised in the center of the grocery store, but with margarines UBFNA has a major position in the dairy aisles. Unilever operates a few other North American food businesses that are not formally part of UBFNA, including Slim Fast, Good Humor/Breyers and Ben & Jerry's.
What followed the merger was an intense period of integration in which UBFNA executives analyzed the two businesses to develop the optimal go-to-market strategy for the new entity. Business models were aligned and selling functions combined. The invoice process was streamlined for retail customers.
By October of last year the company had completed the integration process and was ready to place priority on marketing itself to the trade. Since that time, UBF executives have looked past the details of the merger and integration and have been "aggressively promoting ourselves as to who we are and more importantly, what value we bring," Drogue said. "We're no longer the former Lipton, or former Bestfoods; we're Unilever Bestfoods, singularly focused on moving forward."
Executives are intent on solving challenges for retailers. A priority has been placed on developing innovative branded products that are in sync with current consumer trends. The company is concentrating on leveraging its scale, product variety and global synergies to drive profitable top-line growth for retail customers and for the company's products.
Executives believe the company's experience dealing with retail consolidation and centralization outside the United States has important benefits for American-based retailers. "Outside of the U.S., you have probably three to seven retailers that own anywhere from 70% to 95% of the business," Drogue said. "That model is unique outside of the U.S., and the U.S. is moving that way. Our sister companies have dealt with that in other countries. So we're aware of how to deal in that environment globally, and we can take that learning and bring it into the U.S, adding value to the customers who are going through that model. I think there's an advantage to being the second-biggest food company in the world and being part of the $50 billion global powerhouse that Unilever is."
Unilever's global organization has category teams that transfer knowledge of best practices across the organization relating to innovation, advertising and many other elements. On the North American side, sales executives from each of the food and HPC companies hold joint meetings to discuss common interests across the customer bases. "We develop ideas on how we can take advantage of our scale to provide better service, better ideas and better growth opportunities to our customers," Drogue said. "And that's important, because when we sit down with major retailers, we're a $12 billion entity that brings a $12 billion portfolio, food and nonfood, with strength across many categories of a retail outlet, all of which adds value."
UBFNA is using its brands and products to create coordinated opportunities for retailers. "One of the initiatives is a summer back-to-school event that will be a joint home and personal care food event," Shattock said. "If we can get consumers to go across the aisle between health and beauty and food, then we hope we'll bring a benefit to the retailer." UBFNA is also redirecting some marketing monies into themed promotions with retailers, everything from environmental to ethnic topics, using UBF's portfolio of brands. "If you're in a Spanish market, for example, we might work on a Cinco de Mayo promotion," Drogue said. "This type of thing is something more powerful than what the retailers could have gotten from individual suppliers, or from companies that don't have this thought process." Another initiative is a program that cross promotes UBF brands with retailer private-label products. Examples are promotions involving Skippy peanut butter and a retailer's store-label bread; Lipton main meal side-dish products with the store's meat; and Ragu sauce with store-label pasta.
These types of programs also include noncompetitive brand products. For instance, UBFNA developed a program that promoted Bumble Bee tuna with UBF's Hellmann's mayonnaise and store-label breads. "We talked about tuna salad sandwiches for back to school and summer," Drogue said. "We need to make the consumer want to come into the store and want to shop across the store and get new ideas around developing meals for breakfast, lunch and dinner, and main meals, a side dish and snacking, rather than going out to eat."
UBFNA executives stress that the company's clout with retailers is boosted by its affiliation with its sister organization, Unilever HPC. But executives note that one of their missions is to raise the profile of food in the North American organization of Unilever. "It's important for us to get across that there are two sides to this company," Drogue said. "In the U.S., we are a $12 billion enterprise. About half of that is the HPC business and the other half is food. And as the food component, we're an important part of that. We're getting that across now because of our portfolio of products."
Also helping the message is UBF's focus on the center of the store. Retailers are particularly receptive to new ideas in that space, Drogue said. "Center store is the non-sexy area of the grocery store," he explained. "Everybody picks the perimeter as the area for long-term growth. Retailers really need to energize the center of the store. What they'll tell you is that it isn't good enough to just be No. 1 and gain the responsibility of category captaincy. You have to also bring innovation and growth."
UBF's brand portfolio has undergone a major transition recently as the company has moved to streamline its offerings around core brands. The parent company reduced the number of brands from about 1,600 to roughly 400, many of which will be employed on a global basis. On the North American side, there were about 26 brands before the UBFNA merger, and that number has been reduced significantly.
But the reduction in the number of brands is not a move that limits growth. The core brands can be extended beyond their traditional categories to address additional consumer needs, executives stressed. And these brands will benefit from additional resources of people, funds and research and development efforts, executives added.
Spreads and oils: Brands in margarine include Shedd's Country Crock, I Can't Believe It's Not Butter, Brummel & Brown, Take Control, Promise and Mrs. Filbert's. Skippy in peanut butter. Bertolli and Mazola in oil (Unilever said last month that it will sell the Mazola brand business to Memphis-based ACH Foods Cos.).
Dressing: Hellmann's and Best Foods in mayonnaise. Hellmann's and Best Foods in spoonable salad dressing. Wish-Bone, Western and Henri's in pourable salad dressing.
The growth of the company's brands is fueled by new efforts to study the consumer. "We are trying to move away from research towards insight," Shattock said. "We're really trying to get below the surface to understand what the consumer's needs are. I think for a long time the traditional model of research has been the rearview mirror: explaining what happened in the past. But we want to look to the windshield and what might be in the future."
So UBF is "combining rigorous quantitative research with qualitative research," Shattock said. The company is exploring shoppers on many levels. "We are talking to consumers, spending more time in their homes observing how they cook and prepare their foods, talking to the most valuable people who buy foods in various categories and understanding the drivers of their purchases. We are going along on shopping trips with them regularly, not just once a year."
This consumer exploration extends to the kitchen as well -- that is, UBF's kitchen in its headquarters. Noted Shattock: "We bring consumers into our kitchen and say, 'Here's an idea, what do you think of it? Please cook it, talk to us about your experience. Let us know if it was a good or bad experience, easy or difficult."'
The kitchen, as might be expected, is used for more than just consumer feedback. Executives test products and associates view cooking demonstrations by chefs, some of them celebrities. "We stuck that kitchen right in the middle of this new business with a very clear point of view," Shattock said. "This is a focal point. We're not a widget company; we're a food company. We love food and have a passion for it."
As a food company, of course, UBFNA relies on the grocery retail channel to reach the consumer. That's where its in-house model supermarket plays a role. This store, built in the middle of the sales department, has gondolas stocked with products. It showcases all categories that the organization is involved with, plus some others, featuring items from both the company and its competitors. The lighting is realistic to supermarkets and products can be scanned.
But this is no regular supermarket. This store incorporates a conference room so when executives hold business meetings they can talk in a realistic retail environment. A large number of in-store concepts can be tested and analyzed.
All of which further highlights UBF's concentration on solving problems for retailers. The company's overall approach goes beyond merchandising issues and extends to retail execution topics such as in-store labor. "Retailers are strapped for labor costs," Drogue said. "It's important for suppliers to provide resources, when appropriate, to manage the category better, manage the section better, so retailers can more easily get products stocked, with different modules, display shippers and palettes so it minimizes labor expense at the store. Product can be wheeled off the truck, propped up on an end aisle or on the an appropriate wall of values, and you take off the outside wrapping and there it is, well-displayed, well-signed and ready for the consumer to shop."
Another retail execution focus for UBF is information management, in particular harnessing the plethora of data available to retailers. "What everyone struggles with, the retailers and us, is how we take this data around the consumer, around our categories, and put it together and end up with a result that helps us sell more stuff for them and us and makes a better shopping experience for the consumer. We're trying to focus back on how we use the data to make that happen," Drogue said.
The efforts to improve execution for retailers become more important as consolidation creates increasingly larger store operations. "That means you better be right for them because if you miss one of them, you miss 5% or 10% or 15% of your business, or more," Drogue said. "You need to understand where your major customers are going so you can respond to their needs."
But UBF isn't diverting focus from smaller customers at the expense of the giant chains, Drogue emphasized. "When you sit down and talk about what the requirements are for the major companies, they are the same requirements that every retailer in the country has. And so the advantage we have is that with our relationships with the major retailers, we can develop programs and strategies and then take those concepts and apply them to every retailer in the country, whether chain, independent, large, small, grocery or drug, club or mass merchant."
Approximately $6 billion (including some Unilever North American food brands that aren't formally part of UBFNA)