TIME EUROPE
MARCH 27, 2000 VOL. 155 NO. 12
We Make House Calls
In its search for new ways to reach the consumer, Unilever moves downstream into domestic services
By JENNIE JAMES London
Imagine a personal service company that comes to your house to do your laundry while you're at work. While it's there, it sorts out your gardening, and after it's gone, it makes sure the premises remain secure. If you need to do anything else, like hire table linen for a party, you send it an e-mail. Wouldn't that make life easier?
That may not be the pipe dream it now seems. Last week, Anglo-Dutch food and personal care giant Unilever launched myhome, a U.K.-based cleaning service targeting well-off households lacking the inclination or the time to do household chores. At present, myhome is mainly limited to housework duties, and confined to London's southwest. But it has plans to go online, and if all goes well, it will expand into other areas of home management and roll out across Europe and the U.S.
Such a move seems like a significant departure for Unilever, but with the company's share price under pressure, management is searching for new ways to generate growth and distribute products to the consumer in the increasingly competitive world of branded goods. Other pilot projects include Cha tea houses, Unilever's effort to build demand for its tea brands like Lipton and Brooke Bond. More ambitiously, Unilever has invested over $100 million in e-commerce initiatives with sites like iVillage for women in the U.S. and Wowgo for teenage girls in the U.K. Readers visiting the sites will be able to find content supplied by Unilever on personal care--and corresponding Unilever products. At myhome, an effort to move downstream toward the consumer, staff will use Unilever's Persil detergent and the Jif cleaning range. "It's vital that they look at future forms of distribution--they've got to get ahead of the consumer and consumer demand," says David Lang, an analyst at Investec Henderson Crosthwaite. "If they're just going to stick in grocery channels, they're going to die."
Unilever is not alone. The giant consumer goods companies must confront the twin challenges of low sales growth and falling share prices. Investors have shifted out of "old economy" stocks--stalwarts that produce the unexciting essentials of everyday life like food and detergent--and into the shares of "new economy" technology companies. This week, when changes in London's FTSE 100 stock index come into force, its new members will include eight Internet and technology concerns. Such companies are attracting attention despite the fact that few are making a profit--for example, the Ireland-based software firm Baltimore Technologies, which made a 1999 loss of $31 million, enters the FTSE 100 index; brewer Scottish & Newcastle, whose 1999 profit was around $500 million, is out.
In a recent speech Niall FitzGerald, Unilever's co-chairman, partly blamed the market's infatuation with technology for the decline of the firm's share price, which has lost about 40% of its value since last July. "Our business is not based on potential or promise but on the continuing reality that each week, month and year there are more people who need nutritious food, clean homes and personal health," he said. "We have the brands that bring these to consumers everywhere, every day."
Still, the drive for growth has driven Unilever to clean its own house. Last year, the company said it would throw its marketing resources behind just the top 400 of its 1,600 brands in an attempt to accelerate growth. Diageo and Procter & Gamble have also culled products not seen as market leaders. Last month, Unilever said it would cut 25,000 from its workforce of 270,000 and close 100 of its 380 plants. "They had overdiversified," says Charlie Mills, an analyst at Credit Suisse First Boston.
Yet far from just circling the wagons, Unilever has sought ways to take advantage of a changing marketplace. In 1998, it set up Project Foresight, and sent a group of young managers out to look for new trends. One observation led to myhome: in future consumers will eschew products in favor of services. Customers no longer want soap powder, FitzGerald told the Financial Times last year. They want clean clothes.
Unilever, which recorded a 1999 pre-tax profit of about $5 billion, has invested around $3 million in myhome, including the acquisitions of commercial concern Palace Laundry and Mrs McMopp, a home cleaning service. Myhome is presently limited to London, but in the best entrepreneurial spirit, it is thinking big. "We estimate that the U.K. cleaning services market is worth $2 billion," says myhome CEO David Ball. "We're aiming for 20% of that market by 2004."
Myhome, the tea houses and the e-commerce ventures seem to take Unilever far from what it does best. The myhome business model is personalized and labor-intensive--a far cry from mass production of detergent or yogurt. Ball concedes that, but says Unilever's knowledge of what consumers want brings a strength to all its new ventures. More importantly, he says, "Unilever recognises that being more solid and more profitable won't make it more adventurous." Unilever's willingness to take chances is admirable. But even if all of its projects are successful, in this brave new world investors may still decide that the firm is simply old detergent in new boxes.
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