7a. Unilever's Acquisitions

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition
22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods
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The McGrawHill Companies, 2002
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Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

Arthur A. Thompson
The University of Alabama
Following several years of sluggish performance, Unilevers top management announced a new five-year Path to Growth strategy in February 2000 to rejuvenate the company and restructure its wide-ranging portfolio of food, home, and personal care businesses. The new strategy initiative fashioned by Unilever co-chairmen Niall FitzGerald and Antony Burgmans came on the heels of a decline in Unilever PLCs stock price from a peak of 690 pence in June 1998 to 341 pence just prior to the announcement. Unilevers Path to Growth initiative involved greatly reducing the size of the companys brand portfolio, concentrating R&D and advertising on the companys leading brands, divesting a number of underperforming brands and businesses, boosting product innovation, making new acquisitions, and achieving faster growth in sales and earnings. Focusing on key brands was expected to allow Unilever to concentrate its advertising and marketing efforts on higher-margin businesses and build brand value, thus gaining increased pricing power with supermarket retailers. The five-year initiative was expected to cost a total some 5 billion euros (); entail closing or selling 100 factories and laying off some 25,000 employees (10 percent of Unilevers workforce) so as to consolidate production at fewer plants; and ultimately produce annual savings of 1.5 billion through better strategic fits, a streamlined supply chain, and greater operating efficiencies. By 2004, Unilever management predicted, the company would be expanding its sales 5 to 6 percent annually and have boosted its operating profit margins from 11 to over 16 percent, sufficient to produce double-digit growth in earnings per share. Following the announcement of its Path to Growth strategy, which was met with considerable skepticism on the part of industry analysts, Unilever management undertook a series of actions over the next 12 months to deliver on its commitments to boost the companys sales and profits. By March 2001, the company had
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Made 20 new acquisitions worldwide, including SlimFast diet foods; Ben & Jerrys ice cream; Bestfoods (whose 1999 sales totaled $8.6 billion across 110
Copyright 2001 by Arthur A. Thompson.
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countries and whose major brands included Hellmanns mayonnaise, Skippy peanut butter, Mazola corn oil and margarines, and Knorr packaged soup mixes); Corporacion Jaboneria Nacional (an Ecuadorian company, with sales of approximately 114 million, that had strong market positions in detergents, toilet soaps, skin creams, dental care, margarine and edible oils); Grupo Cressida (a leading consumer products company in Central America); and Amora-Maille (a French maker of mustards, mayonnaises, ketchups, pickles, vinegars, spices, and cooking sauces with 1999 sales of about $365 million). Cut the companys brand portfolio from 1,600 brands to 970. (To reach the 2004 corporate goal of focusing on about 400 core brands, Unilevers brand reduction strategy called for letting certain brands wither and decline without active promotion and support, selling those brands that no longer fit in with Unilevers future strategy, and discontinuing the rest.) Launched 20 internal initiatives to deliver additional sales of 1.5 billion on an annualized basis. Divested 27 businesses, including the companys Elizabeth Arden cosmetics business, the Elizabeth Taylor and White Shoulders fragrances, the companys European bakery business, the Bestfoods Baking Company (a U.S. bakery business inherited from the acquisition of Bestfoods), most of its European dry soups and sauces businesses, and an assortment of small businesses that produced and marketed lesser-known European grocery brands. Reorganized the company into two roughly equal-sized global divisions, one including all of the companys food products and the other including all of its household and personal care products. Started two new businessesCha, a chain of tea houses, and Myhome, a laundry and home cleaning service test-marketed in Britain in 2000 and being tested in the United States and India in 2001.
Unilevers operating results after the first year of the Path to Growth initiative were somewhat encouraging. In February 2001, the company announced that sales growth in the companys major brands had accelerated to 4.9 percent in the fourth quarter of 2000. Revenues in 2000, including acquisitions, were up 16 percent, to 47.6 billion. Net profits, however, were down from 2.97 billion in 1999 to 1.1 billion in 2000, largely due to 1.3 billion in restructuring charges associated with the Path to Growth initiative. Management said it was ahead of schedule in its restructuring efforts.
COMPANY BACKGROUND
Unilever was created in 1930 through the merger of Margarine Unie, a Dutch margarine company, and British-based Lever Brothers, a soap and detergent company. Margarine Unie had grown through mergers with other margarine companies in the 1920s. Lever Brothers was founded in 1885 by William Hesketh Lever, who originally built the business by establishing soap factories around the world. In 1917, Lever Brothers began to diversify into foods, acquiring fish, ice cream, and canned foods businesses. At the time of their merger, the two companies were purchasing raw materials from many of the same suppliers, both were involved in large-scale marketing of household products, and both used similar distribution channels. Between them, they had operations in over 40 countries.
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Cases in Strategic Management
Searching for Focus and Identity

Over the next decades, Unilever continued acquiring companies and brands, gradually moving into more food and household products categories in more and more countries. Still, as late as the mid-1970s, more than half of Unilevers profits came from its West African plantations that produced bulk vegetable oils for margarine and washing powders. In the 1970s and early 1980s, Unilever diversified beyond food and household products into specialty chemicals, advertising, packaging, market research, and a U.K.based franchise for Caterpillar heavy equipment. The specialty chemicals business transformed products from some of the companys plantations into ingredients for food and household products; Unilever also had shipping lines that transported Unilever products. However, during the late 1980s and 1990s, the specialty chemicals, advertising, packaging, shipping, and market research businesses were divested in an attempt to shed the companys image as a conglomerate and focus resources on the companys core businesses. Unilevers broad-based product and geographic diversification in foods, personal care products, and household products spawned a complex management structure that gave considerable decision-making power to country managers to set their own priorities and to tailor products to local tastes. From time to time, Unilevers top executives had launched new initiatives and reorganization plans aimed at giving the company more focus as a multinational marketer of food, personal care, and household products. Still, in 2000, the company had 1,600 brands of food, personal care, and household products, with sales exceeding $43 billion and operations in 88 countries. Unilever was one of the worlds 5 largest food and household products companies and had been ranked among the top 60 of Fortunes Global 500 largest corporations since 1995. According to Irish co-chairman Niall FitzGerald, Were not a manufacturing company any more. Were a brand marketing group that happens to make some of its products.1 In early 2000, at the time the Path to Growth initiative was announced, the top 400 of Unilevers 1,600 brandssome global brands like Liptons and Dove and some local jewels like Persil (the leading brand of detergent in Great Britain)accounted for over 85 percent of the companys annual revenues. A number of Unilever brands had either the highest or second highest share in their respective markets. Exhibit 1 shows Unilevers product and brand portfolio in February 2000.
Organization and Management

To preserve the companys Dutch and British heritage, Unilever maintained two headquartersone in Rotterdam and one in Londonand operated under two co-chairmen. The companys headquarters group in Rotterdam, headed by Antony Burgmans, was in charge of food products, while the London headquarters group, under Niall FitzGerald, was in charge of personal care and household products. FitzGerald had been chairman of the London-based portion of Unilever since 1996 and was said to have been instrumental in reorganizing Unilevers 1,600-brand portfolio around 14 groups as opposed to the former 57 groups. Company observers regarded FitzGerald as one of the most able and innovative Unilever chairmen in decades. Officially, the two co-chairmen had equal status and responsibilities. Each had offices in both Rotterdam and London, shuttling between the two headquarters locations every couple of weeks. They kept in contact via phone daily. To complement its unique dual headquarters/dual co-chair approach, the company had a dual holding company structure whereby Unilevers own1
Quoted in The Financial Times, February 23, 2000, p. 27.
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exhibit 1 Unilevers Business and Product Line Portfolio in Early 2000

Unilever Foods Group Product Category Margarines, spreads, and cooking oils Brands I Cant Believe Its Not Butter, Country Crock, Imperial, Take Control, and Promise spreads, Brummel & Brown spreads and sprays, Bertolli and Puget olive oils, Flora/Becel spreads and cooking products Birds Eye frozen foods (sold in U.K.), Iglo frozen foods (sold in most other European countries), Gortons frozen seafood products, Findus pan-prepared meals, and Quattro Stelle meal solutions Breyers, Magnum, Solero, Walts, Langnese, Ola, Algida, Cornetto, Viennetta, Pinguino, Carte dOr, Klondike, Popsicle, and Good Humor ice cream products Lipton, Lipton Ice Tea and Lipton Brisk (ready-to-drink teas), Brooke Bond and Beseda teas Unilever had ice cream sales in more than 90 countries worldwide. Comments The world leader in margarine and related spreads and olive oil, with sales in more than 50 countries, Unilever had significant oil plantations in the Democratic Republic of Congo, Cte dIvoire, Ghana, and Malaysia.
Frozen foods
Ice cream and frozen novelties
Tea-based beverages
Lipton was the worlds most popular tea brandUnilever had extensive tea plantations in India, Tanzania, and Kenya that supplied tea for its own brands and the tea market in general Rag was Unilevers biggest selling culinary brand; Calv was Unilevers most widely used culinary brand with sales in Greece, Russia, Romania, and much of Europe. Amora mustard was the best-selling mustard brand in France. A number of the dry soups and sauces businesses were sold to Campbell Soup in January 2001 for approximately 1 billion.
Culinary products
Rag and Five Brothers pasta and pizza sauces, Colmans mustard and sauces, Amora and Maille mustards, ketchup, and dressings, Lawrys seasonings, Upron Spices and seasonings, Wishbone and Calv salad dressings; Calv peanut butter; Slotts and Klocken mustards, ketchup and seasonings, Sizzle & Stir sauces, Wishbone salad dressings, Oxo stock cubes, Batchelors dry soup mixes (a U.K. brand), Royco dry soup mixes (sold in France and Belgium), Heisse Tasse dry soup mixes (sold in Germany), and instant Cup-A-Soup, Recipe, McDonnells, Bla Band, and Lipton soups Carte dOr Bread and confectionery mixes, baking ingredients, frozen bakery products such as Danish pastries, muffins, and croissants
Desserts Bakery products
Had operations across 13 European countries, with sales of 860 million, operating profits of 60 million, and a workforce of approximately 3,900 people (continued)
ership was divided into two classessome shareholders owned Unilever NV stock (based largely on food products) that traded on the Dutch stock exchange, and some shareholders owned Unilever PLC stock (based largely on personal care and household products) that traded on the London FTSE and was included as part of the FTSE 100 Index. Since Unilever stock was also traded on the New York Stock Exchange, the company reported its financial results in euros, British pounds, and U.S. dollars. The two companies, Unilever NV and Unilever PLC, operated as nearly as practicable as a single entity; a series of intercompany agreements ensured that the position of shareholders in both companies was virtually the same as having shares in a single company.
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exhibit 1
(concluded)
Unilever Home & Personal Care Group (operations in 60-plus countries)
Product Category Prestige fragrances
Brands Calvin Klein, Chlo, Cerruti, Valentino, Lagerfeld, Nautica, Elizabeth Taylor, White Shoulders, Vera Wang Rexona/Sure, Axe/Lynx, Dove, Degree, Brut, Suave, Impulse ThermaSilk, Sunsilk, Mods Hair (Japan), Finesse, Suave, Caress, Dove, Salon Selectives, Timotei, and Organics shampoos; AquaNet and Rave hair care products Aim, Pepsodent, Mentadent, and Close-up (Asia-Pacific, United States), Signal (Europe), Zhongua (China) toothpastes; Signal and Mentadent chewing gums Dove, Lux, Degree, Caress, Lever 2000, Lifebuoy, and Shield soap bars; Ponds, Vaseline, and Fair & Lovely skin care products; Hazeline shampoos and skin care products (sold in China); Q-tips cotton swabs and balls Wisk, Oxo, Omo, Surf, Ala, Persil, All, and Skip detergents; Snuggle, Cajoline, and Comfort fabric conditioners. Domestos surface cleaners, Cif household cleaners, Sunlight dish detergents, and Solvol (a heavy-duty hand cleaner marketed in Australia and New Zealand) Unipath pregnancy tests Diversey/Lever commercial cleaning products
Comments Unilevers fragrance brands represented one of the largest fragrance businesses in the world. Rexona/Sure was the worlds number one deodorant brand.
Deodorants and toiletry products Hair care
Oral care and oral products
Soaps, lotions, and skin care products
Dove was the worlds number one brand of soap.
Laundry detergents and fabric conditioners Household care and cleaning products
Snuggle was the number two brand of fabric softener in the United States with annual sales of about $350 million. Domestos was marketed in 43 countries, and Cif was marketed in 53 countries.
Diagnostics Professional cleaning
These products were sold to institutional, laundry, and food and beverage customers.
Source: Compiled by the case researcher from a variety of company sources.
Longtime company analysts regarded Unilever management as a slow-moving, unwieldy, and inherently conservative Anglo-Dutch bureaucracyone that operated in a staid manner resembling the civil service approach of government agencies. As one analyst put it, Historically, Unilever has been a very inbred business. People used to join the company from college and leave it when they were carried out in a box. It was a cradle-to-grave company.2 In 2001, about 90 percent of the companys managers were locally recruited and trained. Company critics, moreover, saw Unilever as burdened by lack of a coherent corporate strategy and an array of lesser-known, low-volume brands; very few of Unilevers brands had global standing or qualified as power brands. In emergingcountry markets, where there was the greatest potential to grow sales of food and household products, Unilevers performance was said to be lackluster. Unilevers food businesses had traditionally been organized around countries, with each country having its own factories engaged in making products for mostly national and sometimes regional geographic markets. Some countries had multiple brands of
2 Quote attributed to David Lang, consumer industry analyst at brokerage firm Investec Henderson Crosthwaite, in an article by John Thornhill in the Financial Times, London edition, August 5, 2000, p. 12.
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exhibit 2 Summary of Unilevers Performance, 19952000 (dollars and euros in millions, unadjusted for cross-year exchange rate fluctuations)
Revenues Year 2000 1999 1998 1997 1996 1995 Dollars $43,809 43,680 44,908 48,761 52,067 49,738 Euros 47,582 40,977 40,437 41,105 39,785 36,234 Net Income $1,017 2,953 3,270 5,463 2,500 2,325 Fixed Assets (Including Goodwill and Intangibles) $34,852 27,940 35,807 31,671 30,993 30,077
Employees 295,000 255,000 267,000 287,000 306,000 308,000
Source: Unilever annual report for 2000 data; Fortune Global 500 statistics for 199599 data; and Wright Investors Service for revenues in euros.
the same productfor example, American shoppers could choose from seven Unilever brands of margarine (Promise, Imperial, Country Crock, Brummel & Brown, Mazola, Take Control, and I Cant Believe Its Not Butter!); in the United Kingdom there were nine Unilever margarine brands, although only three were supported by advertising. The strategy in margarine was to cater to a wide range of tastesfrom a German preference for lighter-colored spreads to British preferences for spreads with a higher fat content to American tastes for flavorful and healthier spreads. There were cases where the same Unilever productsMagnum ice cream bars, for instancedid not utilize uniform names, logos, or packaging from country to country.
Performance Issues
Unilever shareholders had not been particularly happy with the companys performance in recent years (see Exhibit 2). During the 1990s, Unilevers sales grew at an average annual rate of 2 percent, well under managements target rate of 56 percent and below the 3.1 percent achieved by Nestl (the worlds largest food products company) and the 4.9 percent achieved by Procter & Gamble. The share price of Unilevers London-based operation, Unilever PLC, had lagged the FTSE 100 Index by almost 40 percent since 1995. Unilever had sales per employee of around $160,000 in 2000, compared with $360,000 for Procter & Gamble, $205,000 for Nestl, $458,000 for Kelloggs, and $605,000 for General Mills. Unilever executives believed the Path to Growth initiative would rectify the companys mediocre performance. Concentrating the lions share of R&D, advertising and promotion, and management time on the top 400 brands, they believed, would deliver 56 percent annual growth in revenues. Faster revenue growth, coupled with costsaving efficiencies from better strategic and resource fits among the top 400 brands, was expected to push operating profit margins up from 11 to 16 percent and permit double-digit earnings growth by 2004. Much of the margin improvement was expected to come from pruning the low-volume, local brands and thereby simplifying and streamlining the companys supply chain. To stimulate more innovation and entrepreneurial thinking, Unilever had begun stepping up efforts to attract talented managers from outside the company. In addition, Unilever had revised its incentive compensation system. In the old system, the top 300400 managers could earn an annual bonus worth up to 40 percent of their salaries, with the average bonus rate being 15 to 25 percent. Under the recently introduced
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system, outstanding managers who hit exacting growth and earnings targets could earn up to 100 percent bonuses. A further move was to alter the award of stock options from giving equal amounts to all managers at a particular level (based on the companys overall performance) to making awards of shares based on individual performance.
INDUSTRY ENVIRONMENT
The food and household products industry was composed of many subsectors, each with differing growth expectations, profit margins, competitive intensity, and business risks. Industry participants were constantly challenged to respond to changing consumer preferences and to fend off maneuvers from rival firms to gain market share. Competitive success started with creating a portfolio of attractive products and brands; from there success depended largely on product-line growth through acquisitions (it was generally considered cheaper to buy a successful brand than to build and grow a new one from scratch) and on the ability to continually grow sales of existing brands and improve profit margins. Advertising was considered a key to increasing unit volume and helping drive consumers toward higher margin products; sustained volume growth also usually entailed gaining increased international exposure for a companys brands. Improving a companys profit margins included not only shifting sales to products with higher margins but also boosting efficiency and driving down unit costs. In 2000, there was a wave of megamergers involving high-profile food and household products companies (see Exhibit 3). Three factors were driving consolidation pressures in the food industryslower growth rates in the food sector, rapid consolidation in retail grocery chains (which enhanced the buying power of supermarket chains and enhanced their ability to demand and receive slotting fees for allocating manufacturers favorable shelf space on their grocery aisles), and fierce competition between branded food manufacturers and private-label manufacturers. The earnings growth picture for many food companies had been bleak for several years, and the trend was expected to continue. In the United States, for example, sales of food and household products were, on average, growing 12 percent, slightly higher than the 1 percent population growth. More women working outside the home, decreasing household sizes, and greater numbers of single-person and one-parent households were causing a shift of food and beverage dollars from at-home outlays to away-from-home outlays. The growth rate for food and household products across the industrialized countries of Europe was in the 2 percent range, with many of the same growth-slowing factors at work as in the United States. Food industry growth rates in emerging or less-developed countries were more attractivein the 34 percent range, prompting most growth-minded food companies to focus their efforts on markets in Latin America, Asia, Eastern Europe, and Africa. Since 1985, the share of private-label food and beverages sold in the United States had risen steadily, accounting for roughly 25 percent of total grocery sales in 2000, up from 19 percent in 1992. Growing shopper confidence in the leading supermarket chains and other food retailers like Wal-Mart (which had begun selling a full line of grocery and household items at its Supercenters) had opened the way for retail chains to effectively market their own house-brand versions of name-brand products, provided the house brand was priced attractively below the competing name brands. Indeed, with the aid of checkout scanners and computerized inventory systems, retailers knew as well or better (and more quickly) than manufacturers what customers were buying and what price differential it took to induce shoppers to switch from name brands to private-label brands. These developments tilted the balance of power firmly
exhibit 3 Mergers and Acquisitions among Food and Household Products Companies in 2000
Value of Deal $10.5 billion in cash General Mills brands: Big G cereals (Wheaties, Cheerios, Total, Lucky Charms, Trix, Chex, Golden Grahams); Betty Crocker desserts and side dishes; Gold Medal flours; Bisquick; Hamburger Helper; Lloyds; Yoplait and Colombo yogurts; Pop Secret; Chex Mix snacks; Nature Valley, Bugles Nabisco brands: Nabisco cookies, crackers, and snacks; Grey Poupon French mustards Pillsbury brands: Pillsbury and Martha White flours, baking mixes, and baking products; Hagen-Dazs ice cream and frozen yogurt; Green Giant frozen and canned vegetables; Old El Paso Mexican foods; Totinos and Jenos pizzas; Progresso; Hungry Jack Brand Portfolio of Acquiring Company Brand Portfolio of Company Being Acquired
Companies Involved
General Mills acquired the Pillsbury unit of Diageo (a U.K.based company with a wideranging portfolio of alcoholic beverage brands and the parent of Burger King and Pillsbury) $19 billion in cash, stock, and debt
Philip Morris (the parent of Kraft Foods) acquired Nabisco
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Kraft Foods brands: Kraft cheeses, mayonnaise, salad dressings, barbeque sauces, and dinners; Post cereals; Jell-O; Velveeta; Cheez Whiz; Cracker Barrel, Di Giorgo and Hoffmans cheeses; Claussen pickles; Maxwell House, Yuban, and Sanka coffees; Minute rice; Tobler and Toblerone chocolates; Louis Rich and Oscar Mayer meats; Miracle Whip; Shake N Bake; Breakstone; Cool Whip; Planters; Kool-Aid; Stove Top; Altoids Kelloggs brands: Kelloggs cereals, Eggo, NutriGrain, Pop-Tarts, Kashi cereal and breakfast bars, Rice Crispies Treats, SnackUms
Kelloggs acquired Keebler
$4.4 billion
Keebler brands: Keebler cookies; Murray cookies; Keebler snack foods (Cheez-It, Wheatables, Toasteds, Munchems, Harvest Bakery, Snax Stix); Krispy and Zesta saltine crackers; Club crackers; Hi-Ho crackers; Golden Vanilla Wafers; Ready Crust pie shells International Home Foods brands: Chef Boyardee, Pam cooking spray, Louis Kemp/ Bumblebee seafood products, Libbeys canned meats, Guldens mustard
ConAgra acquired International Home Foods
$2.9 billion
ConAgra brands: Armour, Banquet, Butterball, Blue Bonnet and Parkay margarines, Chun King, La Choy, Orville Redenbachers and Act II popcorns, Peter Pan peanut butter, County Line cheeses, Morton prepared foods, Eckrich meats, Fleischmanns, Egg Beaters, Healthy Choice, Hunts PepsiCo brands: Pepsi soft drinks, Mountain Dew, Frito-Lay snack foods, Tropicana juices Cadbury Schweppes brands: Schweppes and Canada Dry tonics, sodas, and ginger ales; 7UP; Dr Pepper; A&W; Motts apple juices; Clamato juices; Cadbury chocolates and confectionery items; Trebor, Pascall, Cadbury clair, and Bassett candies
PepsiCo acquired Quaker Oats
$12.4 billion in cash and stock $1.45 billion
Quaker brands: Gatorade, Quaker Oats cereals, Rice-A-Roni, Aunt Jemima, Near East, Golden GrainMission pastas Snapple brands: Snapple ready-to-drink teas and beverages
Cadbury Schweppes acquired the Snapple Beverage Group from Triarc, Inc.
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toward retailers. Thus, competition between private-label goods and name-brand goods in supermarkets was escalating rapidly, since retailers margins on private-label goods often exceeded those on name-brand goods. The battle for market share between private-label and name-brand goods was expected to continue as private-label manufacturers improved their capabilities to match the quality of name-brand products, while also gaining the scale economies afforded by a growing market share. Brand-name manufacturers were trying to counteract the bargaining power of large supermarket chains and the growth of private-label sales by building a wide-ranging portfolio of strong brandsthe thesis being that retailers, fearful of irritating shoppers by not carrying well-known brands, would be forced to stock all of the manufacturers name-brand products and, in many cases, award them favorable shelf space. At the same time, because they faced pressures on profit margins in negotiating with retailers and combating the competition from rival brands (both name-brand rivals and privatelabel rivals), manufacturers were trying to squeeze out costs, weed out weak brands, focus their efforts on those items they believed they could develop into global brands, and reduce the number of versions of a product they manufactured wherever local market conditions allowed (to help gain scale economies in production). Exhibit 4 provides a brief profile of selected competitors of Unilever. Other competitors included Sara Lee, H. J. Heinz, Kelloggs, and well over 100 regional and local food products companies around the world. Many of the leading food products companies had a food-service division that marketed company products to restaurants, cafeterias, and institutions (such as schools, hospitals, college student centers, private country clubs, corporate facilities) to gain access to the growing food-awayfrom-home market.
UNILEVERS BUSINESSES AND BRAND PORTFOLIO

Analysts familiar with the household products business and with Unilever were skeptical that there were meaningful strategic and resource fits between food products and household/personal care products. Some saw Unilevers reorganization into a foods group and a home and personal care group as a possible precursor to the breakup of Unilever, an outcome denied by Unilever executives. The Foods division, known as Unilever Bestfoods following the 2000 acquisition and integration of Bestfoods, was organized around the six product categories: spreads and dressings; tea and tea-based beverages; culinary products; frozen foods; ice cream; and the global food-service business. The Foods division generated slightly more than half of Unilevers sales. The Home and Personal Care (HPC) division consisted of eight categories: deodorants, hair care, household care, laundry, mass skin care, oral care, personal wash, and fragrances and cosmetics. The Foods Division and the Home and Personal Care Division were each headed by a director who had global profit responsibility and executive authority for aligning brand strategy with operations worldwide.3 Underneath the division heads were directors for each product category and regional presidents who were responsible for profitability in their respective regions. Both divisions had an executive committeecomposed of the division director (acting as chairperson), the directors for each product category, and the regional presidents that was responsible for the overall results and performance of Unilever. Most research and new product development activities were integrated into the divisional structure, but the company had formed a small number of global innovation centers to interlink
3
Company press release describing the realignment of the senior management structure at Unilever, August 3, 2000.
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exhibit 4
Company (Headquarters) Nestl (Swiss)
Profile of Selected Unilever Competitors

Product Categories/Brands Chocolates and candies (Nestl, Crunch, KitKat, Smarties, Butterfinger, Cailler, Frigor, Chokito, Galak/Milkybar, Yes, Quality Street, Baci, After Eight, Baby Ruth, Lion, Nuts, Rolo, Aero, Polo) Dairy (Carnation, Milkmaid, Nespray, Nido, Neslac, Gloria, Brenmarke) Coffee (Nescaf, Tasters Choice, Bonka, Zoegas, Ricoffy, Loumidis, Coffee-mate) Beverages (Nesquik, Nestea, Carnation, Libbys, Perrier, San Pellegrino, Poland Spring, Calistoga, Vittel, Valvert, Arrowhead, Buxton, Vera) Frozen Foods (Stouffers, Maggi, Buitoni) Culinary products (Maggi, Libbys, Crosse & Blackwell, Buitoni) Ice Cream (Nestl, Frisco, Dairy Farm) Pet care (Friskies, Fancy Feast, Alpo, Mighty Dog, Gourmet, Ralston Purina) Cosmetics (LOral) Others (PowerBar, Nestl cereal, Alcon eye care products) Food services Baby care (Pampers, Luvs) Laundry products (Tide, Cheer, Downy, Bounce, Bold, Dreft, Era, Gain, Ivory Snow, Ariel) Household cleaners (Joy, Cascade, Dawn, Comet, Mr. Clean/Top Job) Food/Beverage (Folgers, Jif, Crisco, Pringles, Sunny Delight, Millstone) Health and oral care (Crest, Pepto-Bismol, Metamucil, Vicks, Nyquil) Feminine care (Always, Tampax) Paper products (Bounty, Charmin, Puffs) Personal care (Ivory, Camay, Safeguard, Zest, Secret, Old Spice, Cover Girl, Max Factor, Head & Shoulders, Olay, Pert, Vidal Sassoon, Pantene, Physique, Noxema, Hugo Boss) Pet care (Iams) Oral care (Colgate toothpaste, toothbrushes, dental floss; KolynosLatin America) Personal care (Irish Spring, Softsoap, Protex, Palmolive, Speed Stick, Afta, Mennen) Household care (Palmolive, Ajax, Murphys Oil, Javex) Fabric care (Fab, Dynamo, Fleecy, Suavitel, Ajax) Pet foods (Hills Science Diet and Prescription Diet) Sales 2000: Fr 81.4b* 1999: Fr 74.7b 1998: Fr 71.7b 1997: Fr 70.0b 1996: Fr 60.5b Profits 2000: Fr 5.76b* 1999: Fr 4.72b 1998: Fr 4.20b 1997: Fr 4.18b 1996: Fr 3.59b Key Facts Worlds largest food company with sales in almost every country of the world; 509 factories; 231,000 employees.
Procter & Gamble (U.S.)
2000: $40.0b 1999: $38.1b 1998: $37.2b 1997: $35.8b 1996: $35.3b
2000: $3.54b 1999: $3.76b 1998: $3.78b 1997: $3.42b 1996: $3.05b
Sales in over 140 countries; on-theground operations in more than 70 countries, 110,000 employees; and 300 brands. Tides market share was over 4 times larger than its nearest competitor; Ariel laundry detergent was sold in 115 countries (with the highest or second highest share in 25 countries). Tide and Ariel had combined sales greater than any other P&G brand.
Colgate-Palmolive (U.S.)
2000: $9.36b 1999: $9.12b 1998: $8.97b 1997: $9.06b 1996: $8.75b
2000: $1.06b 1999: $0.94b 1998: $0.85b 1997: $0.74b 1996: $0.64b
Sales in over 200 countries and territories; 70% of sales outside the United States; 38% of 2000 sales came from new products introduced in past five years.
(continued)
*Swiss francs.
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exhibit 4
Company (Headquarters)
(continued)
Product Categories/Brands Chocolates and candies (Life Savers, Creme Savers, Altoids and Gummi Savers; Cote dOr, Terrys, Gallito, Milka, and Toblerone chocolate and confectionery products; Jell-O ready-to-eat refrigerated desserts) Snacks and crackers (Nabisco, Oreo, Chips Ahoy!, SnackWells cookies; Ritz, Premium, Triscuit, Wheat Thins, Cheese Nips; Planters nuts; Balance Bar nutrition and energy snacks; Lyux salty snacks; Terrabusi, Canale, Club Social, Cerealitas, Trakinas, Lucky biscuits) Meats (Oscar Mayer and Louis Rich cold cuts, hot dogs and bacon; Boca Burger soy-based meat alternatives; Simmenthal meats in Italy) Cereals (Post Raisin Bran, Grape-Nuts and other ready-to-eat cereals; Cream of Wheat and Cream of Rice) Culinary products (Jell-O, Cool Whip frozen whipped topping; Miracle Whip; Kraft and Good Seasons salad dressings; A-1 steak sauce; Kraft and Bulls-Eye barbecue sauces; Grey Poupon premium mustards; Claussen pickles; Royal dry packaged desserts and baking powder; Kraft and ETA peanut butter; Vegemite yeast spread, Miracoli pasta dinners and sauces, Shake N Bake coatings) Convenient meals (DiGiorno, Tombstone, Jacks, and Delissio frozen pizzas; Kraft macaroni & cheese dinners; Minute rice, Stove Top meal kits; Lunchables) Beverages (Maxwell House, General Foods International Coffees, Yuban, Jacobs, Gevalia, Carte Noire, Jacques Vabre, Kaffe, HAG, Grand Mere, Kenco, Saimaza, and Dadak coffees; Capri Sun, Tang, Crystal Light, Country Time, Royal, Verao, Fresh, Frisco, Q-Refres-Ko, and Ki-Suco powdered soft drinks; Suchard Express, OBoy, Milka and Kaba chocolate drinks) Cheeses (Kraft, Velveeta, Cracker Barrel, Eden, and Dairylea cheeses; Philadelphia cream cheese, Cheez Whiz process cheese sauce; Knudsen and Breakstones cottage cheese and sour cream) Sales 2000: $26.5b 1999: $26.8b 1998: $27.3b 1997: $27.7b 1996: $27.9b Profits 2000: $4.62b 1999: $4.25b 1998: $4.18b 1997: $4.20b 1996: $3.36b Key Facts International sales accounted for about 35% of the total; Kraft had 228 manufacturing plants (147 outside the United States) and 550 distribution centers and depots (176 outside the United States); in the United States, Kraft brands had number one market share ranking based on dollar volume in 23 grocery and food categories; in international markets, Kraft brands were number one based on unit volume in one or more countries in 10 product categories.
Kraft Foods (U.S.) a subsidiary of Philip Morris Companies
(continued)
Operating earningsPhilip Morris does not report net income separately for its business divisions.
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exhibit 4
Company (Headquarters) Groupe Danone (France)
(continued)
Product Categories/Brands Dairy (Danone and Dannon yogurts, cream cheese, yogurt-style cheeses, and fresh dairy desserts, Actimel, Galbani, La Serenisima) Bottled water (Evian, Volvic, Aqua, Boario, Crystal Springs, Ferrarelle) Biscuits and crackers (LU, Bagley, Danone, Opavia, Bolshevik, Jacobs, Saiwa, Britannia, Griffins, several others) Culinary (Lea & Perrins, HP steak sauce, Amoy Asian products) Baby foods (BldiniFrance) Cheese (GalbaniItaly) Sales 2000: 14.3b 1999: 12.9b 1998: 13.5b 1997: 12.8b 1996: 12.1b Profits 2000: 721m 1999: 598m 1998: 559m 1997: 506m 1996: 325m Key Facts World leader in fresh dairy products (15.1% share worldwide); bottled waters have a number one market share in several countries and a 10.8% share worldwide; LU crackers was the number one brand in several countries in Asia-Pacific region; had a 9% market share in biscuits/crackers worldwide. Sales in 120 countries (38% outside the European Union); 148 production plants, 86,000 employees. Campbells was the number one wet soup brand in the world; Arnotts was the market leader in biscuits and crackers in Australia and was the number two brand in New Zealand; Pace, Liebeg, V8, Pepperidge Farm. Erasco, and Homepride were also the market leaders in their segments. (continued)
Campbells Soup (U.S.)
Soups (Campbells, Healthy Request, Simply Home, Swansons broth, Liebeg, Erasco, Homepride, Stock Pot) Bakery (Pepperidge Farm, Arnotts) Culinary (Pace, V8, Prego, Swansons, Franco-American, Homepride Pasta Bake, Kimball sauces) Chocolates (Godiva)
2000: $6.27b 1999: $6.42b 1998: $6.70b 1997: $7.96b 1996: $7.68b
2000: $714m 1999: $724m 1998: $660m 1997: $713m 1996: $802m
with R&D at the division level and the companys worldwide brand innovation organization. Unilevers local companies were the key interface with customers and consumers, responding to local market needs. Unilever executives saw the formation of two global divisions as having three benefits:
Improving the companys focus on foods and HPC activities regionally and globally. Accelerating decision making and execution through tighter alignment of brand strategy with operations. Strengthening innovation capability through more effective integration of R&D into the divisional structure and the creation of global innovation centers.
As part of the companys organizational restructuring, Unilever was closing 100 plants in Europe and North America, and trimming 25,000 jobs to concentrate production
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exhibit 4
Company (Headquarters) General Mills/ Pillsbury (U.S.)
(concluded)
Product Categories/Brands Flours and baking mixes (Pillsbury, Martha White, Gold Medal, Bisquick, Robin Hood) Snacks and Beverages Ice cream and dairy (Hagen-Dazs, Yoplait and Trix yogurts) Desserts (Betty Crocker) Cereals (Cheerios, Wheaties, Total, Lucky Charms, Trix, Cocoa Puffs, many others) Frozen and refrigerated foods (Green Giant, Totinos, Pillsbury, Jenos) Dinner mixes (Betty Crocker, Hamburger Helper, Farmhouse) Culinary (Progresso soups, Old El Paso Mexican foods, Green Giant) Snacks (Chex Mix, Nature Valley, Pop Secret) Food service Sales 2000: $6.70b 1999: $6.25b 1998: $6.03b 1997: $5.61b 1996: $5.42b Profits 2000: $614m 1999: $535m 1998: $422m 1997: $445m 1996: $476m Key Facts The acquisition of Pillsbury in 2001 made General Mills a $13 billion company with a wider and stronger product/brand portfolio; still, about 95% of sales were in the United States.
Source: Compiled by the case researcher from company websites and company documents.
at 150 key sites and 130 ancillary sites. Efficiencies and cost savings associated with consolidating manufacturing were a key part of the companys Path to Growth plan to realize annual savings of 1.5 billion (after restructuring charges of 5.0 billion). In 2000, Unilever spent about 1.2 billion for R&D and 6.5 billion on advertising and brands promotions. Unilevers ice cream and beverage categories had a bad year in 2000, with losses increasing from 22 million in the third quarter to 60 million in the fourth quarter, following a poor summer in Europe. Unilever said it had a cracking year in Asia, while in Latin America management characterized the performance as a good recovery. Interest charges in 2000 rose sharply to 632 million, up from 14 million in 1999, owing to the debt-financed acquisitions. The company had reduced its brand portfolio from 1,600 to 970 as of February 2001, with the top 400 accounting for 78 percent of total revenues in 2000. An additional 250300 brands had been targeted for pruning by 2002. Another 200 had been designated as suitable for merger and migration into the product families of the top 400 brands. According to Niall FitzGerald, This [migration] is a complex process. No one else has [done it] on this scale. It is easy to change a namethe marketing challenge is to bring the consumer with you.4 Also, by year-end 2000, 20 of the planned 100 factories had been closed, with related workforce reductions of 5,300 people. Some analysts had criticized Unilever for paying too much for several of its acquisitions. For example, Unilever paid a purchase price of 715 million to acquire Amora Maille (equal to 16.6 times Amora Mailles 1999 operating earnings of 43 million)a price well above the earnings multiples commanded by other food businesses and an amount said to be double what the present owners paid to acquire Amora Maille from Group Danone in 1997. Unilever paid 14.1 times EBITDA (earnings
4
Quoted in Unilever Unveils Big Hit Innovations, Brand Cull Progress, Euromarketing via E-mail 4, no. 3 (February 9, 2001).
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exhibit 5 Selected Financial Performance Statistics for SlimFast, 1997 through the First Quarter of 2000 (dollars in millions)
1997 Sales revenues Advertising and promotional expenditures Earnings before interest, taxes, depreciation, and amortization (EBITDA) Earnings before interest and taxes (EBIT) operating profits EBIT % (operating profit margin)
*Up 21% over Q1 1999. Up 28% over Q1 1999. Source: www.unilever.com, April 17, 2001.
1998 $505 102 117 112 22.2%
1999 $611 142 133 125 20.5%
Q1 2000 $194* n.a. n.a. 39 20.1%
$390 87 78 76 19.4%
before interest, taxes, depreciation, and amortization) for Bestfoodsa record high for a foods company and above the 12.8 times EBITDA that Philip Morris/Kraft paid for Nabisco and the 12.1 times EBITDA that PepsiCo paid for Tropicana in 1999. Unilever defended its price for Amora Maille, saying it was justified based on the superior growth prospects the business would deliver relative to other grocery products and on the 19.3 times EBIT (earnings before interest and taxes) that PepsiCo paid for Tropicana in 1999 and the 16.5 times EBIT that Frito-Lay paid for Australia-based Smiths Snackfoods Company in 1997.
THE SLIMFAST ACQUISITION

Two months after announcing the new Path to Growth strategy in February 2000, Unilever negotiated an agreement to acquire SlimFast diet foods for $2.3 billion cash. SlimFast, a privately held company headquartered in Miami, Florida, was the U.S. market leader, with a 45 percent market share, in the $1.3 billion North American weight management and nutritional supplement industry. The companys nearest competitor had a market share of just over 25 percent. SlimFast had sales of $611 million in 1999, up 20 percent over 1998 (see Exhibit 5); the companys net assets totaled $160 million at the time of acquisition. SlimFasts ready-to-drink selections (72 percent of total sales), powders (16 percent), and bars (12 percent) all had the leading positions in their category segments. An estimated 2 million U.S. consumers used SlimFast products daily, and an additional 5 million used SlimFast products occasionally. About 94 percent of SlimFasts sales were in North America. Studies showed the SlimFast brand name had an unaided 89 percent recognition rate among U.S. consumers. SlimFast produced a portion of its products at a company-owned manufacturing facility in Tennessee and sourced the remainder from contract suppliers. It had a strong sales and distribution network, having been successful in gaining shelf space in most supermarkets and drugstores, and had spent over $400 million on advertising and promotion during the past four years. The companys products were made from natural ingredients supplemented with added vitamins and minerals to provide a strong nutritional profileno appetite suppressants were used. Promotional efforts centered on the themes of good health, balanced nutrition, great taste, and convenient product formats (ready-to-drink products, powders, and bars). SlimFast had conducted extensive clinical trials to validate the performance of its products. The company had a strong physician education program and
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enjoyed good relationships with the U.S. Food and Drug Administration (FDA) and other regulatory agencies. Unilever was attracted to SlimFast because the company was growing about 20 percent annually and because people all across the world were increasingly interested in living a longer, healthier, and more vital life. Market research indicated that in the United States, Germany, and the United Kingdom nutrition was the number one dietary concern and that weight was number three. In the United States, Western Europe, Australia, and the largest cities in the rest of the world, between 40 and 55 percent of the population were overweight and 15 to 25 percent were obese. According to the World Health Organization, the number of people who were either overweight or obese was increasing at an alarming rate. Unilever management saw opportunities to use the companys global distribution capabilities to introduce SlimFast in Europe, Australia, and cities in developing countries, perhaps doubling SlimFasts sales within two to three years. According to independent market research, the world market for diet products and nutritional foods was about $31.7 billion annually and was growing annually at 11.3 percent. Unilever executives believed SlimFast products would appeal to weight-conscious Europeans; according to co-chairman Antony Burgmans, Europe at the moment is underdeveloped. We are in a perfect position to boost the presence of this brand.5 Company projections indicated that SlimFast would begin to contribute positively to Unilevers cash flows in 2002 and to earnings in 2003. Unilever believed that SlimFast had a strong management team.
THE BEN & JERRYS ACQUISITION

After considering offers from Unilever, Diageo (at the time, the parent company of arch-rival Hagen-Dazs), Nestl, Roncadin (an Italian company), and Dreyers (a rival maker of super premium ice cream products and a long-time distributor of Ben & Jerrys products), the board of directors of Ben & Jerrys Homemade, Inc., in April 2000 agreed to accept Unilevers offer of $43.60 for all of the companys 7.48 million shares, resulting in an acquisition price of $326 million. The $43.60 price represented a premium of 23 percent over the closing price the day prior to the announcement of the agreement and was well above the $15.80 to $20.00 range the stock traded in prior to the five buyout offers becoming public knowledge in December 1999. Exhibit 6 shows Ben & Jerrys recent financial highlights. The Ben & Jerrys acquisition put Unilever in the high-end superpremium segment of the ice cream market for this first time and made Unilever the worlds large marketer of ice cream products.
Company Background
Ben & Jerrys began active operations in 1978 when Ben Cohen and Jerry Greenfield, two former hippies with counterculture lifestyles and very liberal political beliefs, opened a scoop shop in a renovated gas station in Burlington, Vermont. Soon thereafter, the cofounders decided to package their ice cream in pint cartons and wholesale them to area groceries and mom-and-pop storestheir logo became Vermonts Finest All Natural Ice Cream and the carton design featured a picture of the cofounders on the lid and unique handstyle lettering to project a homemade impression. The cartons were inscribed with a sales pitch by Ben and Jerry:
This carton contains some of the finest ice cream available anywhere. We know because were the guys who made it. We start with lots of fresh Vermont cream and the finest
5
Quoted in an article by Mark Bendeich, Unilever Buys U.S. Health Foods Firm for $2.3 billion, and posted at www.economictimes.com, April 12, 2000.
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exhibit 6 Financial Performance Summary, Ben & Jerrys Homemade, Inc., 199499 (in thousands except per share data)
1999 Income statement data Net sales Cost of sales Gross profit Selling, general & administrative expenses Special charges* Other income (expense)net Income (loss) before income taxes Income taxes Net income (loss) Net income (loss) per sharediluted Shares outstandingdiluted Balance sheet data Working capital Total assets Long-term debt and capital lease obligations Stockholders equity 1998 1997 1996 1995 1994
$237,043 145,291 91,752 78,623 8,602 681 5,208 1,823 3,385 $ 0.46 7,405 $ 42,805 150,602 16,669 89,391
$209,203 136,225 72,978 63,895 693 9,776 3,534 6,242 0.84 7,463
$174,206 114,284 59,922 53,520 (118) 6,284 2,388 3,896 0.53 7,334
$167,155 115,212 51,943 45,531 (77) 6,335 2,409 3,926 0.54 7,230
$155,333 109,125 46,208 36,362 (441) 9,405 3,457 5,948 0.82 7,222
$148,802 109,760 39,042 36,253 6,779 228 (3,762) (1,869) (1,869) $ (0.26) 7,148 $ 37,456 120,296 32,419 72,502
$ 48,381 149,501 20,491 90,908
$ 51,412 146,471 25,676 86,919
$ 50,055 136,665 31,087 82,685
$ 51,023 131,074 31,977 78,531
*The special charge in 2000 concerned a writedown of Springfield, Vermont, plant assets and employee severance costs associated with outsourced novelty ice cream products. The 1994 charge stemmed from early replacement of certain software and equipment installed at the plant in St. Albans, Vermont, and included a portion of the previously capitalized interest and project management costs. No cash dividends have been declared or paid by the company on its capital stock since the companys organization in 1978. Earnings were used to provide needed working capital and to finance future growth. Source: Company annual reports.
flavorings available. We never use any fillers or artificial ingredients of any kind. With our specially modified equipment, we stir less air into the ice cream, creating a denser, richer, creamier product of uncompromising high quality. It costs more and its worth it.
A Time magazine article on the superpremium ice cream craze appeared in August 1981 with the opening sentence, What you must understand is that Ben & Jerrys in Burlington, Vermont, makes the best ice cream in the world. Sales at Ben & Jerrys took off, rising to $10 million in 1985 and to $78 million in 1990. By 1994, Ben & Jerrys products were distributed in all 50 states, the company had 100 scoop shops, and it was marketing 29 flavors in pint cartons and 45 flavors in bulk cartons.
Products and Operations in 2000

Headquartered in Burlington, Vermont, Ben & Jerrys in 2000 produced and marketed over 50 superpremium ice cream flavors, ice cream novelties, low-fat ice cream flavors, low-fat frozen yogurts, and sorbets, using Vermont dairy products and highquality, all-natural ingredients. Like other superpremium ice creams, Ben & Jerrys products were high in calories (about 300 per serving), had a fat content equal to 40 to 55 percent of the recommended daily allowance for saturated fat per serving, and were high in cholesterol content (20 to 25 percent of the recommended daily allowance). About 35 of the flavors were packaged in pint cartons for sale in supermarkets, grocery
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stores, and convenience stores; the rest were packaged in bulk tubs for sale in about 200 franchised and company-owned Ben & Jerrys scoop shops, restaurants, and foodservice accounts. To stimulate buyer interest, the company came up with attentiongetting names for its flavors: Chunky Monkey, Chocolate Chip Cookie Dough, Bovinity Divinity, Coconut Cream Pie, Chubby Hubby, Double Trouble, Totally Nuts, and Coffee Ol. Many of the flavors contained sizable chunks of cookies or candies, a standout attribute of the companys products. Retail prices for a pint of Ben & Jerrys were around $3.25 in May 2001. At year-end 1999, Ben & Jerrys had 164 franchised scoop shops; 8 PartnerShop franchises (not-for-profit organizations that operated scoop shops); 19 Featuring Franchises (scoop shops within airports, stadiums, college campus facilities, and similar venues); 12 Scoop Station franchises (prefabricated units that operated within other large retail establishments); and 9 company-owned scoop shops (4 in Vermont, 2 in Las Vegas, and 3 in Paris, France). Internationally, there were nine franchised Ben & Jerrys scoop shops in Israel, four in Canada, three in the Netherlands, one in Lebanon, and one in Peru. The company began exporting from its Vermont plants to Japan in 1997, selling single-serve containers through an exclusive arrangement with 7-Eleven Japan. In 1999, it established a wholly owned subsidiary in Japan for the purpose of importing, marketing, and distributing its products through Japanese retail grocery stores. Beginning in January 2000, Ben & Jerrys imported all products into Japan through an agreement with a Japanese trading company.
Distribution The companys products were distributed throughout the United States and in several foreign countries. Company trucks, along with several local distributors, handled deliveries to retailers in Vermont and upstate New York. In the rest of the United States, Ben & Jerrys relied on distribution services provided by other ice cream manufacturers and marketers. It was the distributors job to sell retailers on stocking a brand, deliver supplies to each retail location, and stock the freezer cases with the agreed-on flavors and number of facings. Up until 1998, Ben & Jerrys utilized two primary distributors, Suts Premium Ice Cream for much of New England and Dreyers Grand Ice Cream for states in the Midwest and West. To round out its national coverage, the company had a number of other distributors that serviced limited market areas. In 1994, Dreyers accounted for 52 percent of Ben & Jerrys net sales. The arrangement with Dreyers was somewhat rocky, and in 1998 Ben & Jerrys began redesigning its distribution network to gain more company control. Under the redesign, Ben & Jerrys increased direct sales calls by its own sales force to all grocery and convenience store chains and set up a network where no distributor had a majority percentage of the companys sales. Starting in 1999, much of the distribution responsibility in certain territories was assigned to Ice Cream Partners (a joint venture of Nestl and Pillsbury, the parent of Hagen-Dazs); the balance of U.S. deliveries was assigned to Dreyers and several other regional distributors, but Dreyers territory was smaller than before and entailed Ben & Jerrys receiving a higher price than formerly for products distributed through Dreyers. Manufacturing Ben & Jerrys operated three manufacturing plants, two shifts a day, five to seven days per week, depending on demand requirements. Superpremium ice cream and frozen yogurt products packed in pint cartons were manufactured at the companys Waterbury, Vermont, plant. The companys Springfield, Vermont, plant was used for the production of ice cream novelties and ice cream, frozen yogurt, low-fat ice cream, and sorbets packaged in bulk, pints, quarts, and half gallons. The St. Albans, Vermont, plant manufactured superpremium ice cream, frozen yogurt, frozen smoothies, and sorbet in pints, 12-ounce, and single-serve containers. Beginning in October
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1999, in order to reduce costs and improve its profit margins, the company ceased production of ice cream novelties at its Springfield plant and began outsourcing its requirements from third-party co-packers.
Competitors
Ben & Jerrys two principal competitors were Dreyers/Edys (which had introduced its Dreamery and Godiva superpremium brands in 1999) and Hagen-Dazs (part of Pillsburywhich was formerly a subsidiary of Diageo but which was acquired by General Mills in 2000see Exhibit 3). Other significant frozen dessert competitors were Colombo frozen yogurts (a General Mills brand), Healthy Choice ice creams (a ConAgra brand), Breyers ice creams and frozen yogurts (Unilever), Kemps ice cream and frozen yogurts (a brand of Marigold Foods), and Starbucks (whose coffee ice cream flavors were distributed by Dreyers). In the ice cream novelty segment, Ben & Jerrys products (SMores, Phish Sticks, Vanilla Heath Bar Crunch pops, Cookie Dough pops, Cherry Garcia frozen yogurt pops, and several others) competed with Hagen-Dazs bars, Dove bars (made by a division of Mars, Inc.), Good Humor bars (a Unilever brand), an assortment of Nestl products, and many private-label brands. Hagen-Dazs was considered the global market leader in the superpremium segment, followed by Ben & Jerrys. Ben & Jerrys had only a negligible market share in ice cream novelties and a low single-digit share of the frozen yogurt segment. Whereas close to 90 percent of Ben & Jerrys sales were in the United States, Hagen-Dazs was represented in substantially more foreign markets, including markets in Europe, Japan, and other Pacific Rim countries. Like Ben & Jerrys, Hagen-Dazs marketed several ice cream flavors using pieces of cookies and candies as ingredients.
Management and Culture

Since 1988 Ben & Jerrys had formalized its business philosophy by adopting and pursuing a three-part mission statement:
Product mission: To make, distribute, and sell the finest quality all-natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products. Economic mission: To operate the company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees. Social mission: To operate the company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad communitylocal, national, and international.
Pursuing the Company Mission The three parts of the mission were deemed equally important, and management strived to integrate their pursuit in its dayto-day business decision making. Starting in 1988, the companys annual report had contained a social report on the companys performance during the year, with emphasis on workplace policies and practices, concern for the environment, and the social mission accomplishments. To support its social mission activities, Ben & Jerrys had a policy of allocating 7.5 percent of pretax income (equal to $1.1 million in 1999) to support various social causes through the Ben & Jerrys Foundation, corporate grants made by the companys director of social mission development, and employee
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community action teams. In addition, the company made a practice of sourcing some of its ingredients from companies that gave jobs to disadvantaged individuals who would otherwise be unemployed, strived to operate in an environmentally friendly manner, and partnered with environmentally and socially conscious organizations working to make the world a healthier and more humane place. Over the years, the company had been actively involved with hundreds of grassroots organizations working for progressive social change, including Greenpeace, the Childrens Defense Fund, the National Association of Child Advocates, the Coalition for Environmentally Responsible Economies, the Environmental Working Group, and the Institute for Sustainable Communities. It had contributed to efforts to save the rain forests in Brazil. One day each year, the company hosted a free cone day at its scoop shops as a way of thanking customers for their patronage. Ben & Jerrys had selected Vermont communities with high unemployment rates for all three of its plants. It had created a blueberry ice cream so it could buy blueberries exclusively from a tribe of Maine Indians and help support their economy. In 1991, Ben & Jerrys had entered into an agreement with St. Albans Cooperative Creamery (a group of Vermont dairy farmers) to pay not less than a specified minimum price for its dairy products in order to bring prices up to levels the company deemed fair and equitable. In 1994, this agreement was amended to include, as a condition of paying the premium price, assurance that the milk and cream purchased by the company would not come from cows that had been treated with recombinant bovine growth hormone (rBGH), a synthetic growth hormone approved by the FDA. The company quit selling a handmade brownie-and-ice-cream sandwich upon discovering that workers hands were developing repetitive strain injuries. In 1999, Ben & Jerrys became the first U.S. ice cream company to convert a significant portion of its pint containers to a more environmentally friendly unbleached paperboard. (Bleaching paper with chlorine to make it whiter was said to be one of the largest causes of toxic water pollution in the United States.)
Company Culture The work environment at Ben & Jerrys was characterized by informality, casual dress, attempts to make the atmosphere fun and pleasurable, and frequent communications between employees and management. Ben Cohen was noted for not owning a suit. Efforts were made to treat employees with fairness and respect; employee opinions were sought out and given serious consideration. Rank and hierarchy were viewed with distaste, and until the late 1990s executive salaries were capped at no more than seven times the pay for entry-level jobs. Compensation levels were above average, compared to pay scales in the Vermont communities where Ben & Jerrys operated. Ben & Jerrys had instituted a very liberal benefits package for its nearly 850 employees that included health benefits for the gay or lesbian partners of employees, maternity leave for fathers as well as mothers, leave for the parents of newly adopted children, $1,500 contributions toward adoption costs, on-site cholesterol and blood pressure screening, smoking cessation classes, tuition reimbursement for three classes per year, a profit-sharing plan, a 401(k) plan, an employee stock purchase plan that allowed employees to buy shares 15 percent below the current market price, a housing loan program, a sabbatical leave program, free health club access, and free ice cream. Nonetheless, the company had experienced occasions where employees expressed dissatisfaction with one or another aspects of their jobs; the periodic meetings management held to discuss issues and concerns with employees had often provoked hot debates. Ben & Jerrys had long prided itself on treating workers so fairly that they did not need and would not want to be represented by a union. But in late 1998 the company became embroiled in a union controversy at its St. Albans plant, where the International Brotherhood of Electrical Workers (IBEW) was trying to organize a group of 19
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maintenance workers. Management refused the IBEWs request to recognize the union voluntarily. Company lawyers, appearing before the National Labor Relations Board (NLRB), opposed the IBEW organizing attempt, arguing that the vote should be held among all workers at the plant, not just among the 19 maintenance workers. Production workers, who made up the majority of the plants workforce, did not support the unions organizing effort as strongly. In early 1999, following an NLRB ruling that the maintenance workers at the St. Albans plant were an appropriate bargaining unit, the 19 maintenance workers voted narrowly for representation by the IBEW. Even though the 19 workers constituted less than 3 percent of the companys full-time workforce, top management at Ben & Jerrys was concerned that the voting outcome raised questions about the quality of employer-employee relations at Ben & Jerrys.
Management Changes
When Ben Cohen, the creative driving force in the company from the beginning, decided to step down as CEO in 1994, the search for a replacement included an essay contest in which anyone wishing to be considered for the CEO position was asked to state in 100 words or less why I want to be a great CEO for Ben & Jerrys. Robert Holland, a former consultant at McKinsey & Co., was selected to become the companys CEO in February 1995; he helped transition the company from a founder-led to a professional management structure and helped begin the companys ventures into international markets. Holland resigned in October 1996, partly because of growing disagreements with the founders over how the company was being operated; he was replaced by Perry Odak, who had held senior management positions at Armour-Dial, Atari, Jovan, Dellwood Foods (a dairy products company), and, most recently, at U.S. Repeating Arms Co. (the maker of Winchester firearms) and Browning, a manufacturer of firearms and other sporting goods.
Company Image and Events Leading Up to the Acquisition Ben & Jerrys counterculture values, unconventional policies, and passionate commitment to social causes were widely known and, in many respects, had emerged as the companys biggest brand asset. Frequent and usually favorable stories in the New England and national press describing Ben & Jerrys proactive approach to caring capitalism had fostered public awareness of the company and helped mold a very positive image of the company and its business philosophy. Indeed, substantial numbers of the companys customers patronized Ben & Jerrys ice cream products because they were suspicious of giant corporations, shared many of the same values and beliefs about how a company ought to conduct its business, and wanted to support the companys efforts and good deeds. So strong was the anti-big-business feeling of some customers, employees, and shareholders that, when the press reported Ben & Jerrys was considering various acquisition offers, there were protest rallies at company facilities in Vermont and a Save Ben & Jerrys website (www.savebenandjerrys.com) sprang up for followers to express their displeasure and to help mount a public relations campaign to block a sale. Hundreds of messages were posted at the siteone message said, My friend and I will not buy Ben & Jerrys again if you sell out. It would not taste the same. Most messages conveyed concerns that Ben & Jerrys would lose its character and social values, ceasing to be a model for other businesses to emulate. Vermonts governor told Reuters, This company has really come to symbolize Vermont to the country and the world. It would be a shame if it were sucked into the corporate homogenization thats taking over the planet.6 Reportedly, neither Ben Cohen nor Jerry Greenfield was enthusiastic about selling the company; both had publicly expressed their desires for the company to remain in6
Quoted in an article by Mike Mills in The Vermont Post, December 9, 1999.
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dependent. But the companys languishing stock price and the attractive offers of interested buyers forced the board of directors to consider being acquired. To counter an offer of $38 per share from Dreyers, Ben Cohen had entered into negotiations with Meadowbrook Lane Capital (one of the companys large shareholders) and others to take the company private. This fell through when Unilever made its offer of $43.60 per share. In agreeing to accept Unilevers price, Cohen netted over $39 million for his controlling interest in the company, while Odak received over $16 million and Greenfield got $9.6 million. A substantial fraction of Ben & Jerrys 11,000 shareholders were Vermont (or former Vermont) residents.
Developments Following the Acquisition

To win approval for the acquisition from the cofounders and the board, Unilever agreed to keep Ben & Jerrys headquarters in Vermont, to operate the company separately from Unilever for a period of time, to maintain employment at current levels for at least two years, to hold employee benefits at current levels for at least five years, and to contribute 7.5 percent of pretax income annually to the Ben & Jerrys Foundation (historically, the foundation had been managed by a nine-member employee board of directors that considered proposals relating to children and families, disadvantaged groups, and the environment). Unilever further agreed to form an independent 11member board of directors for Ben & Jerrys to monitor how well these conditions were being met, with 8 of the board members to be named by Ben & Jerrys management, 1 by Unilever, and 2 by Meadowbrook Lane Capital. Ben Cohen and Jerry Greenfield were also to continue to have active roles in management. In a joint statement announcing the acquisition, Unilevers co-chairmen said, Ben & Jerrys is an incredibly strong brand name with a unique consumer message. We are determined to nurture its commitment to community values. Ben Cohen said, The best and highest use for Ben & Jerrys is to try to influence what goes on at Unilever. Its a gargantuan task. Who knows how far well get? Who knows how successful well be? In November 2000, Unilever announced that Yves Couette had been appointed CEO of Ben & Jerrys, to succeed existing CEO Perry Odak. Couette, a native of France, was one of the top executives in Unilevers ice cream group and had worked in the United States, Mexico, Indonesia, and the United Kingdom. Couette had recently been managing director of Unilevers ice cream business in Mexico, where he had turned Unilevers Helados Holanda business into a solid success with distinctive local brands and scoop shops. In commenting on his appointment, Couette said,
Ben & Jerrys is a unique company, with highly professional and committed people from whom I look forward to learning and connecting to Unilevers world-class knowledge of ice cream. In addition, I am determined to deliver on Ben & Jerrys social mission commitment.
Perry Odak remained with the company until January 2001 to assist Yves Couette in the transition.
THE BESTFOODS ACQUISITION

Bestfoods was a global company engaged in manufacturing and marketing consumer foods. The company had offices and manufacturing operations in 60 countries and marketed its products in 110 countries. About 60 percent of the companys $8.6 billion in sales in 1999 came from outside the United States. Bestfoods employed approximately
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44,000 people, of which about 28,000 were at non-U.S. locations. Food industry analysts considered Bestfoods to be one of the best-managed American food companies, and it was one of the 10 largest U.S.-based food products companies at the time it was acquired by Unilever. Once known as CPC International, the company renamed itself Bestfoods after spinning off its cyclical $1.5 billion corn refining business in late 1997. Exhibit 7 shows Bestfoods product portfolio in mid-2000 when Unilever first offered to acquire the company. During the decade of the 1990s, Bestfoods had grown revenues at a 7.8 percent annual rate, operating earnings at a 10.5 percent annual rate, and earnings per share at a 12.1 percent annual rate; the company had increased its dividends for 14 consecutive years. Growth had slowed during the 199799 period, however. In 1999, Bestfoods sales were up 2.7 percent over 1998, unit volumes were up 4.1 percent, and operating income was up 9.0 percent (see Exhibit 8). Bestfoods corporate strategy had four core elements:
Globalization of the companys core consumer businessesthe Knorr product line, salad dressings, and food-service operations. Continual improvement in cost-effectiveness. Seeking out and exploiting new market opportunities (via both new product introductions and extending sales of existing products to additional country markets). Using free cash flow to make strategic acquisitions. Since the 1980s, Bestfoods had made over 60 acquisitions to expand its lineup of products and brands and to position the company in new geographic markets.
Exhibits 9 and 10 show Bestfoods recent performance and market positions in various country markets. After several weeks of back-and-forth negotiations and increases in Unilevers offer price from the $61$64 per share range to $66 per share to $72 per share and finally to $73 per share, Bestfoods in June 2000 agreed to be acquired by Unilever for what amounted to $20.3 billion in cash (equivalent to 23.6 billion), plus assumption of Bestfoods net debt (which amounted to $3.1 billion as of June 30, 2000). The $73 per share buyout agreement represented a price 44 percent higher than the nearly $51 price at which Bestfoods shares were trading before Unilevers overtures became public and represented about a 20 percent premium over the $59$62 range where Bestfoods shares were trading in late 1999. Bestfoods was, by far, the largest acquisition ever undertaken by Unilever and the largest combination of food companies in 12 years. Unilever management believed that combining and integrating the operations of Bestfoods and Unilever would result in pre-tax cost savings of approximately $750 million annually through combined purchase savings, greater efficiencies in operations and business processes, synergy in distribution and marketing, streamlining of general and administrative functions, and increased economies of scale. In addition, management said that the complementary nature of Unilevers and Bestfoods product portfolios and geographic market coverage better positioned the combined company for faster revenue growth through:
Creating a more robust combined business in the U.S. market. Maximizing the complementary strengths of Unilever and Bestfoods in Europe. Building on the strength of Bestfoods in Latin America to accelerate the growth of Unilevers brands. Using Unilevers distribution network strengths in the Asia-Pacific area to grow the sales of Bestfoods brands. Utilizing Bestfoods food-service channel to gain increased sales for Unilevers portfolio of spreads, teas, and culinary products.
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exhibit 7
Bestfoods Product Portfolio, June 2000

Comments Worldwide sales of about $2 billion, with the leading market share in mayonnaise in North America, Latin America, and many countries of Asia and Europe. In parts of the United States, Hellmanns products were marketed under the Bestfoods brand; Lesieur mayonnaise products were marketed in France and had the second highest market share in that country. Worldwide sales of about $3 billion. Knorr products were sold in virtually all of the 110 countries where Bestfoods had a market presence. It was the number two soup brand, behind Campbells. Marketed in 35 countries.
Products/Brands Hellmanns mayonnaise and salad dressings; Bestfoods, Ladys Choice, and Lesieur mayonnaise and salad dressings; Dijonnaise creamy mustard; Henris and Western salad dressings
Knorr dry soups, sauces, bouillons, and related products
Mazola corn and canola oils and Mazola margarine; Mazola No-Stick and Pro Chef cooking sprays; RightBlend oils Skippy peanut butter Karo and Golden Griddle syrups Argo, Kingsfords, Canada, Bensons, and Maziena corn starches Muellers pastas Rit dyes and laundry products Entemanns bakery goods; Thomas English muffins; Arnold, Brownberry, Oroweat, and Freihofers breads; Boboli pizza crusts
One of the leading brands in the United States and also strong in parts of Asia The Maziena brand of corn starch and other basic nutritional foods was marketed primarily in Latin America.
The Bestfoods Baking division was the largest baker of fresh premium products in the United States; Entemanns was the number one brand of fresh bakery-style cakes and pastries in the United States; Boboli had a 57 percent share of the market for fresh pizza crusts; Bestfoods total sweet baked goods share was 19.2 percent in 1998. A newly-acquired business in Pakistan. A newly-acquired brand in Hungary. Marketed primarily in Europe; sales of about $280 million in 1999. Marketed throughout Latin America. A packaged salt business in India. Provided food-service packs of company products, specially formulated products, and menu-planning and other unique services to support restaurants, cafeterias, and institutions in the growing global market for food prepared and consumed away from homegeographic coverage in virtually all of the countries where Bestfoods operated. The food-service division had worldwide sales of $1.4 billion in 1999.
Glaxose-D energy drinks Globus dressings, condiments, and liquid sauces Alsa and Ambrosia ready-to-eat desserts, dessert mixes, and baking aids AdeS soy beverages Captain Cook salt Bestfoods (in the United States) and Caterplan (outside the United States) food services
Others: Pfanni potato products (Germany), Pot Noodle instant hot snacks (United Kingdom), Telma soups and instant foods products (Israel), Bovril bouillons, Marmite spread, Santa Rosa jams, Sahara pita breads, Goracy Kubek instant soups (Poland), Delikat seasonings (Central Europe), Molinos de la Plata mayonnaise, ketchup, and mustard (Argentina)
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exhibit 8 Selected Financial Statistics for Bestfoods, 199799 (in millions of dollars, except for per share amounts)
1999 Selected income statement data Net sales Cost of sales Gross profit Marketing expenses Selling, general, and administrative expenses Operating income Financing costs Income from continuing operations before income taxes Provision for income taxes Net income Earnings per share of common stock (diluted) Selected balance sheet data Inventories Current assets Plant, property, and equipment Intangible assets, including goodwill associated with acquiring businesses at costs exceeding net assets Total assets Current liabilities Long-term debt Total stockholders equity Selected cash flow data Net cash flows from operating activities Capital expenditures Payments for acquired businesses Net cash flows used for investing activities Repayment of long-term debt Dividends paid on common and preferred stock Net cash flows used for financing activities
Source: Company annual reports, 1998 and 1999.
1998
1997
$8,637 4,546 4,091 996 1,765 1,330 183 1,147 384 $ 717 $ 2.48 $ 792 2,204 1,964 1,811 6,232 2,368 1,842 938 $1,110 278 225 477 153 295 697
$8,413 4,562 3,851 976 1,655 1,187 166 1,021 352 $640 $ 2.09 $ 827 2,405 1,965 1,854 6,435 2,312 2,053 981 $ 819 304 121 264 94 277 440
$8,438 4,693 3,745 978 1,659 866 162 704 250 $ 429 $ 1.15 $ 818 2,188 1,941 1,742 6,100 2,347 1,818 1,042 $ 915 321 298 732 99 256 267
According to a statement issued by Antony Burgmans and Niall FitzGerald, the Bestfoods acquisition would give Unilever a portfolio of powerful worldwide and regional brands with strong growth prospects. Knorr, with $3 billion in annual sales, would become Unilevers biggest food brand. To finance the $21.4 billion Bestfoods acquisition, Unilever arranged for a $20 billion line of credit from several banks, with annual interest costs that analysts expected to exceed $1 billion. It was anticipated that Unilever would ultimately finance the transaction with longer-term debt securities having a currency profile paralleling the geographic composition of the business. In February 2001, Unilever announced the sale of the Bestfoods Baking Company to George Weston, a Canadian food and supermarkets group, for $1.76 billion in cash.
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exhibit 9
Summary of Bestfoods Worldwide Business Results, 199799

1999 Sales and Operations, by Geographic Region
Geographic Region Europe, Africa/ Middle East North America
Sales Revenues (in millions) 1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998 1997 $3,598 3,490 3,539 $3,594 3,452 3,412 $1,071 1,149 1,105 $ 374 322 382
Fixed Assets (in millions) 1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998 1997 $1,568 1,809 1,637 $1,682 1,507 1,547 $ 277 284 291 $ 124 120 101
Areas of Operation, 1999 Operations in 33 countries of Europe, Africa, and Middle East Operations in the U.S. Canada, and the Caribbean Operations in 16 countries
Number of Plants, 1999 59
36
Latin America
19
Asia
Operations in 12 countries, including joint ventures in 7 countries
18
1999 Sales by Product Group Product Group Knorr soups, sauces, bouillons and related products Region Europe North America Latin America Asia Total/average Europe North America Latin America Asia Total/average United States Worldwide Worldwide Worldwide Worldwide Worldwide Sales (in millions) $2,091 470 342 185 $3,088 $464 1,001 443 96 $2,004 $1,697 $569 $406 $280 $593 $1,400 (distributed across several of the product groups above) % Change 4.2% 10.3 9.0 17.0 4.1% 2.7% 4.8 5.7 14.0 2.2% Volumes 9.8% 10.3 7.6 25.0 6.8% 7.9% 5.4 1.7 10.2 5.4%
Dressings
Baking Starches Bread Spreads Desserts All other sales Bestfoods and Caterplan food services
8.4%
Included in the appropriate product groups above
Unilever had announced its intention to divest Bestfoods Baking Company two weeks after closing its merger with Bestfoods on October 4, 2000, noting that the characteristics of the baking business did not fit other Unilever products and that bakery products was a category no longer in existence at Unilever. Bestfoods Baking was entirely U.S.based, with 19 plants across the country, a strong management team, 12,000 employees, and one of the best distribution systems for delivering fresh-baked products directly to retail stores. In 1999, Bestfoods Baking had sales of $1.7 billion (up 2.3 percent over 1998) and an operating profit margin of 8 percent (good for the baking business).
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exhibit 10
Market Positions of Selected Bestfoods Products, by Country, 1999

Pourable Dressings Pasta/Pasta Dishes Desserts (Ambient) Premium Baking Potato Products
Peanut Butter
Foodservice
Mayonnaise
Meal Kits*
Bouillons
North America, Caribbean Canada Dominican Republic United States Europe Austria Belgium Bulgaria Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Netherlands Norway Poland Portugal Romania Russia Slovak Republic Slovenia Spain Sweden Switzerland United Kingdom Africa/Middle East Egypt Israel Jordan Kenya Morocco Saudi Arabia South Africa Tunisia Turkey
2 2 1 1 2 1 1 1 2 1 1 1 1 2 1 1 1 2 2 2 1 1
2 1 1 2 1 1 2 2 1 1 1 1 2 1 1 2 1
1 2 2 1 1 2 1 1 2 2 1 1 1 2 2 1 1 1 2 2 1 1 2
1 1 2 1 2 2 2 1 2 1
1 2
1 1
1 1 1
2 2
Starches
1 Leader in Market Share 2 Second in Market Share Present in the Market

Sauces* Soups*
Corn Oil
1 1 1 1 1
1 2 2
1 1 1
1 2 1 1 1 1 2 1
2 1 2 1
1 2
1 2 1 1 2 2 1 2 1 1
1 2 1
2 1 1
1 1
1 1
1 1
1 1 1 1
2 1
1 2 1 1 1 1 1
2 2 2 1 1 1 2
1 2 1
1 2 1 1 1 2 1
1 (continued)
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exhibit 10
(concluded)
Pourable Dressings Pasta/Pasta Dishes Desserts (Ambient) Premium Baking Potato Products
Peanut Butter
Foodservice
Mayonnaise
Meal Kits*
Bouillons
Latin America Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador El Salvador Guatemala Honduras Mexico Panama Paraguay Peru Uruguay Venezuela Asia China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka Taiwan Thailand Vietnam
1 2 2 2 1 2 2 1 2 1 1 1 1 1 1 1 2 1 1 2
2 1 1 1
1 1 2 1 2 2 1 2 1
1 2
2 2
1 2 2 1 1 1 2
1 2 1 1 1 1 2 1 1 1 2 2 2 1 2 1 2 2 1
1 1 1 1 1 2
2 1 1 1 1 1 1 1 2 2 1 2
Starches
1 Leader in Market Share 2 Second in Market Share Present in the Market

Sauces* Soups*
Corn Oil
1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1
2 2 1 2 1 1 1 1 2 1
1 1 1 1 1 1 1
1 1
1 2 1 1 1 2 1 1 1
1 1 1
2 1 1 1
*Dehydrated products only. Bestfoods foodservice (catering) products hold leading share positions in many of the categories in which they compete. Source: Company annual report, 1999.
UNILEVER IN 2001
The companys 2000 annual report characterized Unilever as a truly multi-local, multinational company dedicated to meeting the everyday needs of people everywhere. Unilever management was generally pleased with first-year results of the
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companys five-year Path to Growth initiative. Management believed its recent acquisitions had greatly strengthened the companys competitive position, giving it a world-beating brand portfolio and unrivaled geographic coverage (see Exhibit 11). Management also believed the company had built a solid platform for rapid growth in the food-service segment. In 2000 Unilever divested its positions in baked goods, selling its European baking business to a Dutch food products company in July 2000 for 700 million in cash and then, as noted earlier, finding a buyer for the Bestfoods Baking Company several months after completing the Bestfoods acquisition. In January 2001, Unilever sold its European dry soups and sauces businesses (including the Batchelors, Oxo, Royco, McDonnells, Bla Band, and Heisse Tasse brands) to Campbell Soup for 1 billion; also included in the sale was the Lesieur brand of the mayonnaise products sold in France. The brands sold to Campbells had combined sales of 435 million in 2000; EBITDA of 87 million, EBIT of 78 million, assets of 100 million, and about 1,300 employees; overall sales of the products had grown at 1 percent annually over the last three years. Unilevers divestiture of these brands was undertaken to alleviate market power concerns expressed by the European Commission and gain the commissions approval of Unilevers acquisition of Bestfoods. Exhibits 12 and 13 present Unilevers most recent financial statements. By yearend 2000, Unilever had refinanced much of the short-term debt used to finance the Bestfoods acquisition through various bond issues. Interest costs on the companys debt were said to average less than 7 percent and were expected to decline through 2001. Exhibits 14 and 15 present comparisons of Unilevers performance in 2000 versus 1999, by business group and by geographic region of the world. In the first quarter of 2001, Unilever reported revenue gains of 20 percent over the first quarter of 2000 (partly due to the contributions of acquisitions made in 2000), total operating profit gains of 38 percent, and an operating profit margin of 12.4 percent. Global sales growth of the companys leading brands was 4.3 percent on an annualized basis, excluding acquisitions. Unlevers sales growth performance by geographic region was said to be in line with the Path to Growth strategy:
1st Quarter 2001 versus 1st Quarter 2000 12% 31 13 8 7 Growth due to Acquisitions Made in 2000 9% Strong 8% Not reported Not reported Sales Growth of Leading Unilever Brands 3% 2 8 9 10
Region Western Europe North America Africa, Middle East, Turkey Asia and Pacific Latin America
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exhibit 11 Market Standing of Core Products and Brands in Unilevers Portfolio, Year-end 2000
Market Standing at Year-End 2000 Product Category Mayonnaise/salad dressings Bouillons and hot sauces Dry soups Ice cream Margarines and spreads (excluding butter) Tea (black) North America #1 #1 #1 #1 #1 #1 Europe #1 #1 #1 #1 #1 #1 Latin America #1 #1 #2 #1 #1 #1 Rest of World #1 #2 #2 #1 #1 #1 Global #1 #1 #1 #1 #1 #1
Source: Unilever slide presentation posted at <www.unilever.com>, April 2001.
exhibit 12
2000 ( million) 47,582 44,637 2,945 (44,280) 5,729 (1,992) (435) 3,302 3,363 (61) 57 3,359 3,408 (49) (4) (632) 2,723 (1,403) 1,320 (215) 1,105 675 430 (1,458) (44) (1,414) (353)
Unilevers Consolidated Statement of Profit and Loss, 2000 versus 1999

1999 ( million) 40,977 40,977 (36,674) 4,595 (269) (23) 4,303 4,303 42 4,345 4,345 10 (14) 4,341 (1,369) 2,972 (201) 2,771 1,761 1,010 (1,265) (20) (1,245) 1,506 Dividends Preference dividends Dividends on ordinary capital Result for the year retained Group revenues Continuing operations Acquisitions Operating costs Group operating profit before exceptional items and amortization of goodwill and intangibles Exceptional items Amortization of goodwill and intangibles Group operating profit Continuing operations Acquisitions Add: Share of operating profit of joint ventures Total operating profit Continuing operations Acquisitions Other income from fixed investments Interest Profit on ordinary activities before taxation Taxation on profit on ordinary activities Profit on ordinary activities after taxation Minority interests Net profit Attributable to: NV PLC 2000 ($ million) 43,809 41,098 2,711 (40,769) 5,274 (1,834) (400) 3,040 3,096 (56) 52 3,092 3,137 (45) (3) (582) 2,507 (1,292) 1,215 (198) 1,017 621 396 (1,343) (41) (1,302) (326) 10 (15) 4,624 (1,458) 3,166 (214) 2,952 1,876 1,076 (1,348) (22) (1,326) 1,604 45 4,629 4,629 (39,066) 4,895 (287) (24) 4,584 4,584 1999 ($ million) 43,650 43,650
Source: Unilevers annual review, 2000.
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exhibit 13 Unilevers Consolidated Balance Sheet and Cash Flow Statement, 19992000 (at December 31)
Balance Sheet at 31 December 2000 ( million) 37,463 26,467 10,996 5,421 7,254 2,563 1,666 3,273 20,177 (16,675) (11,689) (8,187) 29,276 13,066 1,019 6,404 618 8,169 6,300 1,869 29,276 5,473 18,282 Creditors due within one year (2,936) (9,198) 6,148 15,754 1,853 979 4,582 579 7,761 6,122 1,639 15,754 Borrowings Trade and other creditors Net current assets Total assets less current liabilities Creditors due after more than one year Borrowings Trade and other creditors Provisions for liabilities and charges Minority interests Capital and reserves Attributable to: NV PLC Total capital employed Cash Flow Statement for the Year Ended 31 December 2000 ( million) 6,738* 38 (798) (1,734) (1,061) (27,373) (1,365) (25,555) 2,464 22,902 (189) (27,152) 1999 ( million) 5,654 28 (156) (1,443) (1,501) (362) (1,266) (6,093) (5,139) 5,675 (146) 390 (5,094) Cash flow from operating activities Dividends from joint ventures Returns on investments and servicing of finance Taxation Capital expenditure and financial investment Acquisitions and disposals Dividends paid on ordinary share capital Special dividend Cash flow before management of liquid resources and financing Management of liquid resources Financing Increase/(decrease) in cash in the period (Decrease)/increase in net funds in the period 2000 ($ million) 6,203 35 (735) (1,596) (977) (24,142) (1,257) (22,469) 2,268 21,085 884 (25,310) 1999 ($ million) 6,023 29 (167) (1,538) (1,599) (388) (1,348) (6,491) (5,479) 6,047 (156) 412 (6,101) (15,513) (10,874) (7,616) 27,236 12,155 948 5,958 575 7,600 5,861 1,739 27,236 (2,949) (9,241) 6,175 15,825 1,862 982 4,603 581 7,797 6,150 1,647 15,825 1999 ( million) 9,606 643 8,963 5,124 5,742 1,943 Fixed assets Goodwill and intangible assets Other fixed assets Current assets Stocks Debtors due within one year Debtors due after more than one year Acquired business held for resale Cash and current investments 5,043 6,749 2,384 1,550 3,045 18,771 5,498 18,365 5,147 5,768 1,952 2000 ($ million) 34,852 24,622 10,230 1999 ($ million) 9,650 646 9,004
*Includes payments of 550 million to settle share options and similar obligations in Bestfoods consequent to the change of control. Source: Unilevers annual review, 2000.
C-500
exhibit 14 Summary of Unilevers Performance, 2000 versus 1999, by Group (in billions of Euros and Dollars)
Euros 2000 (at current 2000 exchange rates) 1999 (at current 1999 exchange rates) Percent change (at constant 1999 exchange rates) 2000 (at current 2000 exchange rates) U.S. Dollars 1999 (at current 1999 exchange rates)
2000 (at constant 1999 exchange rates)
Revenues Food Group Home and Personal Care Group 22.3 20.8 1.6 1.5 2.6 2.7 3.0 2.4 11% 2.7 2.0 26% 1.5 2.4 (38)% 1.7 1.8 (8)% 22.8 19.8 5% 21.0 1.6 1.4 2.5 2.7 23.9 20.3 9% 22.0
21.7 21.1
Case
Operating profit Food Group Home and Personal Care Group
1.9 2.5 2.2 2.6
Operating profit BEIA* Food Group Home and Personal Care Group
*BEIA Before exceptional items and amortization of goodwill and intangibles. Calculated using unrounded numbers for revenues and operating profits. Source: Unilever annual review, 2000.
exhibit 15 Summary of Unilevers Performance, 2000 versus 1999, by Geographic Area (in billions of Euros and Dollars)
Euros 2000 (at current 2000 exchange rates) 1999 (at current 1999 exchange rates) Percent change (at constant 1999 exchange rates) 2000 (at current 2000 exchange rates) U.S. Dollars 1999 (at current 1999 exchange rates)
2000 (at constant 1999 exchange rates)
Case
Revenues Europe North America Africa & Middle East Asia & Pacific Latin America 19.2 10.0 2.4 7.2 5.0 1.7 0.1 0.2 0.7 0.3 2.4 1.3 0.3 0.8 0.5 2.5 1.5 0.3 0.9 0.6 2.3 1.0 0.3 0.7 0.4 6% 30% 9% 23% 24% 1.8 0.2 0.2 0.8 0.3 2.2 0.8 0.3 0.6 0.4 (20)% (83)% (10)% 11% (21)% 1.6 0.2 0.2 0.7 0.3 2.3 1.4 0.3 0.8 0.6 19.8 11.6 2.4 8.0 5.7 18.8 8.8 2.3 6.7 4.3 2% 13% 3% 7% 14% 18.2 10.7 2.3 7.4 5.2
20.0 9.4 2.4 7.2 4.6 2.3 0.9 0.3 0.7 0.4 2.4 1.0 0.3 0.7 0.5
Operating profit Europe North America Africa & Middle East Asia & Pacific Latin America
Operating profit BEIA* Europe North America Africa & Middle East Asia & Pacific Latin America
*BEIA Before exceptional items and amortization of goodwill and intangibles. Calculated using unrounded numbers for revenues and operating profits. Source: Unilever annual review, 2000.
C-501

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ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

Copyright 2001 by Arthur A. Thompson.

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Cases in Strategic Management

Searching for Focus and Identity

Organization and Management

Quoted in The Financial Times, February 23, 2000, p. 27.

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

exhibit 1 Unilevers Business and Product Line Portfolio in Early 2000

Ice cream and frozen novelties

Desserts Bakery products

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Cases in Strategic Management

Product Category Prestige fragrances

Deodorants and toiletry products Hair care

Oral care and oral products

Soaps, lotions, and skin care products

Dove was the worlds number one brand of soap.

Diagnostics Professional cleaning

Source: Compiled by the case researcher from a variety of company sources.

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

Employees 295,000 255,000 267,000 287,000 306,000 308,000

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Cases in Strategic Management

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

Philip Morris (the parent of Kraft Foods) acquired Nabisco

Kelloggs acquired Keebler

ConAgra acquired International Home Foods

PepsiCo acquired Quaker Oats

$12.4 billion in cash and stock $1.45 billion

The McGrawHill Companies, 2002

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Cases in Strategic Management

UNILEVERS BUSINESSES AND BRAND PORTFOLIO

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

22. Unilevers Acquisitions of Slimfast, Ben & Jerrys, & Bestfoods

The McGrawHill Companies, 2002

Unilevers Acquisitions of SlimFast, Ben & Jerrys, and Bestfoods

Profile of Selected Unilever Competitors

Procter & Gamble (U.S.)

ThompsonStrickland: Strategic Management: Concepts and Cases, 13th Edition

7a. Unilever's Acquisitions

7a. Unilever's Acquisitions