Harvard Business School: Unilever’s Butter-Beater: Innovation for Global Diversity

Harvard Business School: Unilever’s Butter-Beater: Innovation for Global Diversity

        Historically, Unilever pursued product development and branding strategies. Their goal was to better leverage the company’s fixed investments in brands, new product and development and manufacturing capability across multiple, even global, markets, while not sacrificing the local responsiveness that they deemed to a core Unilever strength. Unilever’s enormous diversity of products had historically served people’s everyday needs, and in 1997 could be broken down in three categories: foods, detergents, and personal care products. The company manufactured over a thousand brands. The biggest portion of turnover included margarine. Unilever was the world’s largest margarine manufacturer. Unilever’s European efforts in developing novel spread products were great.

In exhibits 4, 5, and 6, showed likely success. They used their strategy of using local research and development to go along with their global strategies. The result was not only local brands but also managers who had considerable freedom in selecting which product lines to pursue and what targets to set. There seemed to be conflicting evidence, in exhibit 6, about weather globally or regionally managed foods company would be more successful than a local organized one. Local organized companies know what the local customers want and global managers see the bigger picture. It is extremely important in business that the customer is always right.

Unilever Foods’ first attempt to have a more localized product was with “Krona,” a new cream-spread product. A team had then developed and launched the product in Germany, using that country as a test market. Krona was a success in Germany. Within its first year on the market, Krona had exceeding sales. Now, however, after two successful years in the German market, Krona had still not been launched in other European countries because of disappointing test results in those venues. William (“Bill”) Bordewijk, a member of Unilever’s management committee, was concerned about the apparent lack of cooperation by the managers un Unilever subsidiaries, and worried that Germany had possibly played too dominant a role during Krona’s development, ignoring the input of managers in other countries.

The reason Krona was so successful is because local research and development was used. They had to do something in 1996 because the market surveys conducted in Europe suggested that yellow fat sales were declining because rising health consciousness was promoting consumers to use less fat. Attitudes towards these products were rather negative: it was deemed not enjoyable, not essential for nourishment, and (in Germany) not “natural.” These findings implied an opportunity for a healthy, more natural but good tasting spread product. The category management established a “Novelty Spreads” task force to develop internationally feasible concepts for alternative spreads. “Consumers wanted a milk-based spread that has fewer calories than butter but tastes as good.” This is what started their Research and Development task force in 1989. As a result to local research, the German team decided not to position Krona as a low-fat spread. “ Excellent taste and low-fat content are believed in Germany and many European countries to be contradictory. If we had emphasized the low-fat benefit of Krona, people would not have believed that it tastes much better than low-fat products, which recently were attacked by the media because of their lack of taste and their artificiality.”