Company Watch: Hair care and men’s grooming drive Unilever
Author: Oru Mohiuddin
Date published: 16 May 2008
Unilever's share of the global cosmetics and toiletries market climbed from 7.2% in 2006 to 7.3% in 2007. This is the first rise since a drop in 2005, when the company's share tumbled by 0.4 percentage points from 7.6% in 2004 to 7.2% in 2005, brought about through a number of markets. Current growth is mainly attributable to the firm's men's grooming and hair care portfolios.
Axe/Lynx/Ego help men's grooming portfolio
A combination of strategic pricing and interesting advertisements has boosted the share of Axe/Lynx/Ego, the company's most popular brand in men's grooming, from 6.8% to 7%. Growth was generated in most regions, except Latin America, driving up Unilever's men's grooming market share from 9.22% to 9.47%. Unilever is the global leader in the men's toiletries category, with a 21% share, compared to the mere 9% of its closest rival Procter & Gamble.
Threat in Latin America's men's grooming market
Despite its impressive performance in the men's grooming category, Unilever is being threatened by Natura in Latin America, the only region in which it lost share in the men's grooming category. Natura is actively marketing men's products through direct selling, which is proving a success.
Global threat from Beiersdorf in men's grooming category
Globally, Unilever faces a threat from Beiersdorf, which is actively expanding its men's grooming portfolio. For example, in Eastern Europe Unilever lost share to Beiersdorf in men's bath and shower products. Beiersdorf plans to expand its men's care range to other regions.
Unilever present in slow growth sectors in men's grooming
With a CAGR forecast of 9.3% between 2007 and 2012, men's skin care is predicted to experience the fastest growth in cosmetics & toiletries, while deodorants is predicted to grow at a CAGR of 2.9% and bath and shower products at 4.2%. Present in the slower growing sectors of men's toiletries, Unilever should consider expanding into the faster growing skin care category.
Sunsilk in North America helps hair care growth
Apart from men's grooming, hair care has also contributed to Unilever's growth. In 2006, Unilever introduced Sunsilk to North America, and the share of the brand increased from 0.7% in 2006 to 1.3% in 2007. Driven by growth in the North American market, Unilever's global market share in the hair care category increased from 10.70% to 11.01%. Hair care is one of the fastest growing categories within the cosmetics and toiletries industry and Unilever is rightly focusing on increasing its share in this category.
Unilever not exploiting hair care opportunities
Unilever, however, is not fully exploiting its potential in the hair care category. It should consider increasing the strength of other hair care brands in addition to Sunsilk. For example, Procter & Gamble owns two of the best selling brands – Pantene and Head and Shoulders. In addition, Unilever's hair care portfolio predominantly consists of shampoos and conditioners. It should, therefore, consider entering other hair care categories.
Given Unilever's financial constraints, further portfolio diversification and brand extension may not be possible immediately, but it is something that Unilever should consider in the long term. Unilever has recovered well from the slump of 2005, focusing on the right sectors and regions for growth. However, it faces considerable competition in the marketplace and needs to be well prepared for potential threats. In recent years, Unilever has embarked upon a massive restructuring programme, cutting down duplications in its management structure, arising from years of unmanaged decentralisation. The restructuring is aimed to help unify the firm's global operations and expedite the implementation process. This will most definitely help Unilever confront its competitors in the market. So far, Unilever is moving in the right direction.
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