As the President of Unilever's Foods & Refreshment division, Hanneke Faber may well be one of the most important people in the global food and beverage industry. ESM spoke to her about the opportunities for growth in a rapidly changing marketplace. This article first appeared in ESM Issue 2 2020.
The last time ESM met Hanneke Faber, the president of Unilever’s Foods & Refreshment division, she held the position of chief commercial officer at Ahold, and was playing a key role in the merging of the Dutch retail powerhouse with Belgium’s Delhaize.
Fast forward just under four years, and Faber is overseeing change of a different kind – helping some two billion customers worldwide to eat better.
“Unilever and Ahold Delhaize aren’t that different,” she explains. “We share an understanding of the consumer, and we understand the importance of coming together and building collaboration.
“Of course, when you cross to the ‘other side’, sometimes these conversations are tough, but if you can find yourself in a position where you can do the right thing by your consumer, it becomes a real win-win.”
Brand Positioning
Faber joined Unilever last May, in a time of flux at the consumer goods giant – it had recently sold its Spreads business, including the Becel and Flora brands, to private equity firm KKR, and was investing in the meat alternatives and healthy snacking channels, with the acquisition of The Vegetarian Butcher and Graze respectively.
In its most recent full year, while Unilever saw group sales rise 2.9%, underlying sales growth in Food & Refreshments was largely driven by price increases: pricing was up 1.7%, while volumes were down 0.2%.
As industry analysts have argued, Unilever as a group is too leveraged towards emerging market growth; not necessarily a healthy long-term approach.
“Obviously, developing markets are seeing faster growth – that’s the same for everyone in the consumer goods market,” says Faber. “You would expect a market like India to have market growth of 5%, for example, whereas a market like Germany or the US would be much closer to 1% or 2%.
“But within Unilever, the Foods & Refreshment business has a larger footprint in developed markets – more than half of our businesses is in developed markets. And within that, we’re starting to see momentum, in ice cream for example. While we’re not expecting double digit growth, we are picking up share and remaining competitive.”
Targeting Growth
In recent years, Unilever has sought to evolve its portfolio through a series of acquisitions and disposals, as part of what CEO Alan Jope has described as “portfolio evolution”. While the Unilever of old might have been considered a somewhat bloated conglomerate, the company of the future will be streamlined around core growth segments.
“We’ve made about 10 acquisitions in foods in recent years, and we have a big one – the Horlicks India acquisition – due to close in the Spring,” says Faber. “That’s a great example of portfolio transformation – it’s in a developing market, and it sits in a space that is fast-growing: targeted nutrition. From a geographical and a segment point of view we’re really excited about that acquisition.
“We will continue to look for future acquisitions in fast-moving segments, but we will also be looking at areas in which growth is likely to be slower in the future, like we did with Spreads, and evaluating whether these businesses might be better off with different owners or with different constructs.”
One Unilever segment that is certainly coming under scrutiny at the moment is Tea, with the business announcing in January that is undertaking a strategic review of the business. As Jope admitted in a recent analyst conference, the group’s “disproportionate large footprint” in the slow-moving black tea category is hampering growth.
As Faber explains, the group has been far from “sitting still” in addressing these issues.
“There’s been a lot of effort in shifting the portfolio towards the growth spaces such as green tea and herbal tea,” she says. “But at the same time, we understand that we need to do a significant strategic review of the largest part of that business, which still sits in black tea.”
She points to the acquisition of Pukka, the organic herbal tea business, in 2018, as evidence of how the group is seeking to move the goalposts when it comes to legacy categories. “Pukka is a great acquisition for us,” she says.
“It’s one of the best looking brands in the world, and it’s seen high double digit growth. We’re doing other things in that space as well, with the acquisition of the T2 business in Australia, TAZO in the US, and of course the Lipton brand.”
Future Potential
At the same time, the acquisition of The Vegetarian Butcher, which was completed last January, encapsulates the future direction of Unilever’s food operation.
“Clearly, plant-based is the number one place where we would like to develop more of a presence,” says Faber. “There’s two reasons for this – one is that we eat too much meat in the western world, and the meat industry is having a significant impact on the environment. It’s not that everyone has to become a vegetarian; it’s more the case that plant-based is not just better for people’s health, it’s also much needed for the planet.
“Secondly, it’s not a new area for us. Yes, we’ve just acquired The Vegetarian Butcher, but over the past 10 years, we’ve undertaken outstanding research in the space of meat and dairy replacements; we’re the leader in vegan mayonnaise, for example, and we’re by far the leaders in vegan ice cream. Meat replacement is a bit harder, because it takes some real science to get it right, but it’s a clear focus for us.”
As she explains, Unilever is keen to become “more public” about its efforts to influence consumer dietary habits, as well as address the wider social context that underpins food consumption. One of the group’s macro projects is the Future 50 programme, in conjunction with the WWF, which promotes 50 food ingredients that are going to be part of consumers’ diets in the years to come – algae, quinoa, alfalfa and buckwheat are among those to feature.
“More and more, we’re putting these into our Knorr recipes, and into our products, and getting people to eat differently, while still maintaining a great taste,” says Faber.
Unilever is also making changes to its marketing approach in order to address societal concerns. Having already committed to removing advertising from online platforms that allow ‘toxic’ content, it recently pledged to stop advertising its food brands to children under 12 (or under 13 on social media) by the end of the year. While this could affect sales in categories such as ice cream, the group sees it as the morally correct thing to do.
Brands With Purpose
Since taking over as chief executive in January of last year, Jope has sought to ‘drive purpose’ into Unilever’s brand portfolio, identifying this as one of the group’s fundamental growth drivers. As Faber explains, these are not just empty words – amidst shifting consumer habits, Unilever needs to engage shoppers in a different way.
“There’s a lot of competition in the marketplace, and if you’re standing in front of a shelf with, say, 14 different types of mayonnaise, you’re going to have to make a choice,” she says. “That’s why we feel it’s important to focus on more than just performance, and to make sure that our brands are focused on their purpose as well.
“It’s not something that we have just invented, either – taking The Vegetarian Butcher as an example, it was founded by Jaap Korteweg, a ninth-generation butcher, in response to the swine flu epidemic of the late 1990s. He set out to develop a great-tasting meat alternative, and developed it into a successful business.
“That’s a great example of purpose. At Unilever, we now have the opportunity to build on that.”
But could this instilled sense of ‘purpose’ lead to increased prices for the shopper?
“I would say our pricing is coming in at just below inflation, so it’s not like we’re way out of line, or bringing premium pricing to the market,” Faber adds. “Sometimes, consumers are willing to pay a little bit more, but often they’re not, and they expect brands to meet their needs.”
Hive Of Activity
A key asset in the development of future food innovation at Unilever will be the group’s new global foods innovation centre, Hive, which opened last December at Wageningen University, “which is recognised worldwide as one of the number one food universities”, says Faber. Costing €85 million to develop, the facility will act as a platform to ‘drive innovations that are healthier for the people and for the planet’, as a recent press release put it.
“It’s an open centre, right in the middle of the campus – students or faculty members can walk in and participate,” says Faber. “For us, it’s about fostering new partnerships with start ups and academia to drive innovation.
“In addition, as a major company, we have a responsibility to work with partners in government and NGOs to address issues such as climate change, obesity, nutrition and feeding the planet. Governments can’t do everything themselves, and we have a real role to play.”
The centre should also enable Unilever to “stay flexible and agile” in an increasingly complex marketplace – who could have predicted the coronavirus’ impact at the start of the year – and enable Faber and her team to focus on medium- to long-term goals.
“I think the plant-based space is going to become really important for us, as well as targeted nutrition, and out of home,” she says. “But for us, the bigger prize is around ‘doing well by doing good’, and being a force for good in terms of food transformation.”
2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
