Unilever in Africa: Targeting the Bottom of the Pyramid

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Excerpts

UNILEVER’s GROWTH IN AFRICA

Unilever had been present in Africa for over 100 years, a fact that made it one of oldest multinationals operating in Africa. In 1904, Lever Brothers was incorporated in South Africa and the company opened its first factory in that country in 1911. The factory was not only Lever Brothers’ second largest plant in the world, but it also introduced mass production in South Africa. In 1910, Lever Brothers acquired its first company in West Africa called WB MacIver Ltd, in order to gain access to palm oil, which was used to make Sunlight. A decade later the company acquired a British mercantile company called ‘The Niger Company’. In 1929, Unilever merged ‘The Niger Company’ with ‘The African & Eastern Trade Corporation’ to form ‘The United Africa Company’ (UAC).

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FOCUSING ON LOCAL NEEDS

Unilever realized that Africa’s large size and its population of over a billion presented a large untapped opportunity. Speaking about the large geographical spread of Africa, Braeken said, “It is more than three times bigger than China geographically. You can put China, and India, and Europe and North America in Africa.”..

OFFERING FORTIFIED FOODS

In 1999, Hindustan Unilever Limited (HUL) had developed a patented technology to manufacture iodized salt in India, which was sold under the ‘Annapurna’ brand. The salt was expected to combat Iodine Deficiency Disorder (IDD) and was priced at around the same rate as the salt it was expected to replace. ‘Annapurna’ salt became the first brand in the world to be endorsed by the International Council for Control of Iodine Deficiency Disorders (ICCIDD) . It went on to become a thumping success in India, after which Unilever decided to launch the product in Africa due to its similarity with India in terms of the overall nutritional needs of the population, cooking habits, and market potential of brand staples...

AFFORDABLE PRODUCTS

Over a period of time, Unilever executives realized that small stores in the slums and rural areas of Africa broke open large packs of branded toothpastes, soaps, and packaged food products – manufactured by multinationals -- to make small packs that could be sold to their customers at affordable prices. The primary reason for this was that multinational products sold their products in large packs at prices that were unaffordable to most Africans. Speaking on this issue, Braeken said, “It’s very ironic, borderline shameful, that most products in Africa are more expensive than in Europe. Infrastructure costs a lot, but that is only part of the problem. The other part is a lack of real innovation making products affordable.”..

EXPANDING THE REACH

Another key challenge that Unilever faced in Africa was ensuring that its products, especially its LUP/SUPs, were widely distributed in Africa at a low cost. The company along with other multinationals suffered from the limitations in Africa’s infrastructure such as poor roads and railways, apart from lack of a proper retail network...

AFRICA: FOCUS OF UNILEVER’S SUSTAINABILITY PROGRAMS

Africa had always been at the heart of Unilever’s corporate social responsibility activities. The company undertook several measures to boost education, provide healthcare, and develop employment opportunities in the continent...

ROAD AHEAD

According to several reports, some countries in Sub-Saharan Africa economies were among the fastest-growing in the world, competing with even Russia and Brazil...

EXHIBITS

Exhibit I: Unilever’s African Subsidiaries

Exhibit II A Information on Sub-Saharan Africa - Population

Exhibit II B Information on Sub-Saharan Africa - GDP

Exhibit II C Information on Sub-Saharan Africa - Infrastructure

Exhibit II D Information on Sub-Saharan Africa - Business Environment

Exhibit III Bottom of the Pyramid (BOP) Consumers

Exhibit IV African Middle Class