Large corporations have a thing for emerging markets – reminding a bit of the prehistoric times, when tribes moved around to find better environments to thrive. If there were other inhabitants there, weaker, the tribes made sure to impose their will: better weapons, better hunting skills, better clothing, stronger gods… Growth by assimilation is older than time, and it is one of the main strategies that drive modern business.
For large corporations, innovation is just a buzz term. It’s not really profitable to spend on research. Instead, the big companies wait for smaller companies to grow, and assimilate them later through acquisitions that appear beneficial for both entities. In this spirit, Unilever purchased Alberto-Culver, on September 27, 2010 for $US3.7 billion; and signed an agreement under which Unilever will acquire EVGA’s ice cream brands for an undisclosed amount on September 28, 2010. So the company spent a lot on “growth.” If you want such an outcome for your own business, build it to sell.
Another “innovative” move for Unilever was to sell its less profitable tomato business in Brazil to Cargill Inc. for about 260 million euros. The strategy is simple: get rid of what holds you back, and invest in what makes you profitable.
Spending billions on growth is why Unilver’s company profits in the turned lower than those announced by its main European rivals, Nestle and Danone, but stronger than predicted nevertheless.
It’s interesting to study Unilever’s marketing strategy, and learn from it. They assimilated the best of the best in time, and built an empire based on quality rather than other obscure values. Ben & Jerry’s is still as good today as it was in 2000 when Unilever bought them. Knorr is Unilever’s biggest-selling brand, but it belongs to the company only since 2000… Hellman’s kept the original recipe that made it famous, and the list could go on. These are some of Unilever’s billion dollar brands, that powered the third-quarter sales growth of 3.6 percent. And the main lesson for the savvy marketer today: don’t cut on quality, if you want to stay ahead of the game.
Part of the Unilever profits comes from emerging markets: the company reported underlying sales growth of 6.7 percent in the Asia Africa CEE region, while the Americas grew only 3.9 percent. But growth is growth, and it helped Unilever’s underlying quarterly earnings rise 19 percent to 0.43 Euros a share, just ahead of a consensus forecast of 0.41 €, helped by cost cutting. This lesson is easy too: look for markets that need your products, where competition is less and weaker.
To sum up: every time you hear that a company profits rose, despite hard economic times, try to understand what made them grow. The official press releases that announce the growth are usually written in obscure terms, almost a code. But the code is easy to break if you pay attention. Just go back in time a bit and study the company’s growth strategy overall. For your small business, take only what applies: you cannot buy other businesses, but you can get rid of things that hold you back, and still make a small profit for them. You cannot compete with the big dogs, but you can look for markets where the big dogs haven’t penetrated yet.