Declining sales and operating profits forced Unilever to give up its dual structured ownership. Will this move alter the company's fortunes?
Defending his company's poor run of show, the Chairman of Unilever, one of the world's largest FMCG behemoths, blamed the poor performance of Unilever on its lack of flexibility and timely execution. This statement reflects the tough phase Unilever is going through. Though the turnover for the fourth quarter of 2004 grew by 1%, the company reported a loss of $318 mn in the same quarter. During the said quarter, the operating profit and net profit were down by 16% and 139% respectively. Statistics further revealed that the turnover for the full year of 2004 fell by 2% and net profit was down by 31%.
Under such mounting pressures, the company decided to abandon its dual structure ownership so as to enhance the focus. Under dual structure ownership, the Unilever group operated as one unit while the two group companies Unilever Plc and Unilever NV and their subsidiaries remained as separate entities, with separate listings, headquarters and CEOs.
Of late, the consumer goods industry, in general, has been facing problems of declining sales and rising costs. According to the Boston Consulting Group, the global consultancy firm, the sales of the consumer goods companies over the past five years have grown at a compound annual rate of only 4.7%. On the other hand, their sales and general administrative expenses have been rising by 5% every year. Unilever's performance is no better.
In addition to the already mounting pressure, as industry experts say, the merger between P&G and Gillette will impose more stress on players like Unilever, Colgate-Palmolive, L'Oreal, and Nestlé. The merged entity will be the biggest company in the consumer goods industry with annual sales of $60 bn and a workforce of around 140, 000 people. |
