The company’s food business includes well-established brands like Magnum ice cream and Knorr cooking aids. However, Unilever – and other large CPGs – have come under pressure due to the fragmentation of the food sector and proliferation of agile and dynamic start-up brands. In the US alone, 2017 and 2018 saw the top ten food companies lose US$20m in revenue to challenger brands.
While Unilever reported organic growth of 3.1% in its first quarter, the food and refreshment division saw a more sluggish top line, up 1.5%, following on from a slow fourth quarter.
“Damn, it's tough at the moment if you are a big CPG company,” Walbancke told a briefing organised by marketing specialists HeyHuman this week. “The pesky craft brands are nipping away at market share… This is an existential crisis for some of the big brands.”
Start-ups have some key advantages over large players, Walbancke continued. “They are lightning quick and they are really focused on consumer problems. How often have CPGs innovated in response to a problem they – not the consumer – are faced with, [like] losing market share?”
In contrast, start-ups are able to leverage an intimate relationship with the consumer: “They are using data. Because they have such a tight relationship with their consumer they can respond quickly to what consumers need.”
These start-ups also have low barriers to entry, are able to capitalise on new channels such as direct to consumer, are “really good” at attracting and retaining talent and have flexible manufacturing with “no supply chain”, Walbancke continued.
This access to the consumer – as well as a unique ability to leverage data to fuel innovation – was no doubt a strong motivator for Unilever’s recent acquisition of subscription snack supplier Graze. Graze leverages feedback from its 100,000 subscribers (“grazers”) to understand the category, predict future trends and propel innovation. The company launches a new product every two days on average and fast feedback enables the company to de-risk the innovation process.
In contrast, Unilever has been “built over the last 100 years” and as a result is “really complex”, Wakbancke noted.
The creation of Walbancke’s post is part of Unilever’s response to this challenge. And the executive – a ten-year Unilever veteran – is clear on the scale of the problem. “We talk about this being a marketing transformation job but its really like being a plumber or electrician because you have to re-plumb or re-wire,” he explained.
Walbancke explained that there are around 16 different workstreams related to Unilever’s marketing transformation efforts. However, in the spirit of simplification, he said this can be distilled down to two objectives.
“We are really doing two things: brand experience and faster innovation.”