Unilever ice cream's defense of global market position

Unilever Ice Cream Defends Its Global Market

Index

The international business environment within which Unilever

has to develop its ice cream business

The nature of Unilever's marketing response in its international field of operations

Unilever's competitors and how their company culture and/or strategic approach would be viewed by the strategists at Unilever

Recommendations for Unilever to take ice cream business into the future

Glossary of Terms

Company culture:

According to Reh (2009) "Culture is the values and practices shared by the members of the group. Company culture, therefore, is the shared values and practices of the company's employees" (2). In sum, this term refers to "how we do things around here."

Ice cream:

This term refers to, "A smooth, sweet, cold food prepared from a frozen mixture of milk products and flavorings, containing a minimum of

percent milk fat and eaten as a snack or dessert" (Ice cream 2009, 2); it is differentiated from sorbets, which are manufactured using fruit juices and ice milk, which does not contain milk fats.

MNC:

This acronym stands for "multinational corporation."

Unilever Ice Cream Defends Its Global Market

Introduction

While it is reasonable to suggest that most consumers around the world enjoy ice cream products, there are some vitally important cross-cultural issues that affect the ability of major ice cream manufacturers to market their product lines in different countries. The purpose of this case study is to examine how Unilever has to strategically approach its target market and, now it has, and should, develop its cream strategy. To this end, the background and an overview of Unilever is followed by an analysis of the international business environment within which the company must develop its ice cream business. An assessment of the nature of Unilever's marketing response in its international field of operations is followed by a discussion concerning the company's competitors and how their respective corporate cultures and/or strategic marketing approaches are likely viewed by strategists at Unilever. Finally, a series of recommendations concerning what Unilever should do in order to take ice cream business into the future is followed by a summary of the research and salient findings in the conclusion.

Review and Analysis

Background and Overview.

In his case study of Unilever's ice cream business, Lynch (2006) emphasizes that there are no "one-size-fits-all" marketing approaches that will serve equally well in different markets and makes the point that developing a sustainable competitive advantage requires more than a mere intuitive analysis of the target markets in which the company competes. The research will show that Unilever, headquartered in Rotterdam, the Netherlands and the world's third-largest corporation in the processed and packaged goods industry and largest ice cream manufacturer, does in fact have much to consider given its broad range of ice cream product lines and vastly different cultural markets in which it does business. In this regard, today, Unilever (hereinafter alternatively "the company") markets its ice cream product lines under the international Heart brand, including Cornetto ("possibly the most successful ice-cream cone in the world," Wilson 2001, 4549), Magnum, Carte d'or and Solero, Wall's, Kibon, Algida, Ola, Ben & Jerry's, Breyers, Klondike, and Popsicle brands in Europe, the Americas, Asia, and Africa (Unilever 2009). For Unilever's marketing purposes, perhaps the only thing these markets share in common is the fact that consumers in these countries enjoy good frozen confectionaries and some of them are willing to pay a little more for high quality products that are supported by a well-known brand name and these issues are discussed further below.

The international business environment within which Unilever has to develop its ice cream business.

From a strictly pragmatic perspective with no value judgments intended, developing nations in Africa and some countries in Asia may regard environmentally responsible multinational corporations and their product lines differently from developed countries in Europe and North America and the international business environment in which Unilever competes must take these consumer preferences into account. For example, Holton reports that, "Ben & Jerry's was acquired in 2000 by Unilever, which owns a staggering 1.2 million freezer cabinets worldwide and thus has considerable stake and a corporate mandate to pursue environmentally friendly technologies" (2003, 754). Therefore, it would just make good business sense for the company to promote its well-known environmentally responsible brand in markets where consumers have been shown to place a high value on this attribute. Likewise, Unilever's marketing strategists have kept their eye on local preferences for ice cream specialty products and have been aggressive in their efforts to bring winners into their product mix. For example, Wilson reports that when Unilever's leadership recognized a winner when it saw it in the Cornetto ice cream cone, originally manufactured by an Italian concern, Spica. In this regard, Wilson notes, "The Italian ice-cream firm Spica dipped a cone in a mixture of oil, sugar and chocolate. This insulating coating prevented the ice cream from coming in contact with the wafer and softening it. And so the Cornetto was born" (35). When Unilever saw the reception this ice cream cone was receiving in a country where food-lovers spend almost one-third of their budget on good food, it took steps to acquire the firm and make the product its own. As Wilson points out, "It was not long before Unilever spotted the idea, took over Spica, and launched the Cornetto all over Europe in various flavors. In Spain, the company even did a kiwi-fruit version" (35).

Unfortunately, the company did not stop with this permutation of a winner and, based on their consumer research in Europe, believed the market was ripe for yet another version. A subsequent innovation in ice creamery that was developed by Unilever based on the Cornetto concept was "Mr. Whippy," a knock-off of the Cornetto that is described by Wilson as being "an idea of ice cream, not ice cream itself" (36). Launched in April 2001, Mr. Whippy was vended in supermarkets, newsagents, cinema foyers and from ice-cream vans, just like the company's original Cornetto cone, but this analyst suggests that Unilever missed the mark when it came up with this product because it tasted bad and even looked like pretend food based on its almost surreal packaging.

Despite some healthy initial sales of this product, it is no longer listed in Unilever's brands and its divestiture by Unilever was welcomed by Wilson and other ice cream lovers. This initiative suggests that even major multinationals that invest an enormous amount of resources in market research can get things wrong, even while they get some things right in the international marketplace, and these issues are discussed further below.

The nature of Unilever's marketing response in its international field of operations.

As noted above, Unilever has made some mistakes in its international operations over the years, but it has also enjoyed some stellar successes. In this regard, Michman and Mazze emphasize that, "In considering the shortcomings of ice cream manufacturers, even the most successful manufacturer has made mistakes. Ben & Jerry's stands out in the development of image and target-market segmentation" (1998, 62). Like Unilever's acquisition of Italian ice cream manufacturer Spica, Bogo (2000) notes that the company recognized another winner in Ben & Jerry's, a trend that is becoming increasingly commonplace by major multinationals. In this regard, Bogo notes, "As corporations realize the valuable market niche and consumer loyalty of many natural brands, they have begun, quite literally, to gobble them up. That's certainly the hope of Ben & Jerry's, which was acquired by Unilever. The ice cream company [is] famous for its hometown start and socially responsible message, delivered via unbleached paperboard packaging and bovine growth hormone-free dairy" (22).

Noting that many multinational corporations (MNCs) have failed to gauge cross-cultural issues appropriately to their detriment, Groenewegen (2006) emphasizes that Unilever is managing to enjoy the best of both worlds when it comes to Ben & Jerry's. In this regard, Groenewegen writes, "Often consumers easily make mistakes in judging MNCs: consider a consumer in the United States who purchases Ben & Jerry's ice cream. To most consumers Ben & Jerry's represents the opposite of an MNC, which focuses on profit maximization at the cost of the well-being of complete communities" (853). Despite this popular perception, Groenewegen adds that, "Ben & Jerry's is known because of the support for environmental and social causes and fair labor practices. What most consumers do not know is that Ben & Jerry's was taken over in 2000 by Unilever, one of the largest MNCs in consumer products" (853).

Despite this change in ownership and worries from environmental activists who expressed concern that Ben & Jerry's would no longer be able to adhere to its environmentally responsible businesses model after being acquired by Unilever, Bogo emphasizes that the company has gone to extra lengths to ensure that the model remains firmly in place. According to this analyst, "Unilever, the world's largest ice cream company with brands including Breyers and Good Humor, begs to differ. Ben & Jerry's, the company says, will continue to make its ice cream unhampered, with 7.5% of pre-tax profits donated to community social and environmental organizations through the Ben & Jerry's Foundation. In addition, Unilever will contribute another $5 million to the foundation and create a $5 million fund to help minority-owned businesses" (2000, 22).

Clearly, the company enjoys a wide range of product lines that can be positioned according to the cultural preferences in a given region as well as less easily defined attributes such as the "feel-good" aspects of purchasing some Chunky Monkey by Ben & Jerry's. All that would remain for savvy marketers would be to segment their various markets accordingly and position these labels where they will enjoy the best sales against their several competitors without diminishing the sales of their own other ice cream brands and these issues are discussed further below.

Unilever's competitors and how their company culture and/or strategic approach would be viewed by the strategists at Unilever.

Unilever's current competitors in the international processed and packaged goods industry (in order of total food sales) include major players such as Nestle, Kraft Foods Inc., Frito-Lay North America, Cargill, Incorporated, Tyson Foods Inc., Mars, Incorporated, ConAgra Foods, Inc., and Smithfield Foods Inc. (Unilever 2009). Of these major competitors, only Nestle is actively engaged in the ice cream industry; however, as noted above, the company faces fierce competition from store brands in its outlets around the world and these are included as generic category in the summary of Unilever's major competitors, their respective company culture/marketing strategies and the company's probably response that is presented in Table 1 below.

Table 1

Unilever's major competitors' company culture/marketing strategy and Unilever's response

Competitor

Company Culture/Marketing Strategy

Perception by Unilever Strategists

Nestle

Nestle, manufacturer of Push-Ups and Drumstick's, has a culture that is focused on long-term performance of business units, including ice cream and views them as autonomous businesses. Willing to "weather the political storms" and remain in-country during shifts in political leadership. Solicits local and regional feedback concerning consumer preferences for ice cream products (Parsons 1999).

Nestle is likely viewed as a major threat to its market share in its European and Asian markets and may account for its ill-fated product development efforts (i.e., "Mr. Whippy") in the past. Nestle's has the resources to weather economic downturns and enjoys a loyal brand following that Unilever would want to overcome by promoting its well-known brands in competition.

Private label ice cream

The marketing strategy of private brands appears to be based on provided consumers with a viable alternative to higher price named brands such as those offered by Unilever. In fact, in many markets, house brands of ice cream dominate the market based on their lower cost and the fact that value has replaced prestige for many consumers today. As Michman and Mazze point out, despite Unilever's past successes, "None of these successes have been able to overcome the market impact of private-label store brands. Ice cream manufacturers have not been able to build strong brands to limit the market penetration of store brands. No longer is there a stigma attached to buying private labels. Ice-cream manufacturers need to reevaluate their marketing strategies and the threat of private-label brands" (62). According to Cotterill (1994), "There is a negative relationship between brand price and local market share. Pricing strategies at the brand level in differentiated markets can vary significantly among firms and possibly among products in a single firm" (109). Citing the example of one of Unilever's best-selling brands, Cotterill notes that, "Breyers, the leading national brand, sells at a premium that primarily reflects the fact that it is an all natural premium ice cream. Private label products are regular ice creams . . . Breyers' market share is considerably less sensitive to price changes than private label products" (109).