unilever-business-model

Unilever Direct-To-Consumers Business Model

Unilever is the world’s leading consumer goods companies, making and selling around 400 brands in more than 190 countries in 2017 – based on a direct-to-consumer business model. With over 53 billion euros in revenues that span across personal care, home care, foods and refreshment, Unilever is the second largest advertiser in the world.

It’s able to reach millions of consumers across the world thanks to its marketing campaigns.

Unilever Purpose

Unilever stated purpose is “to make a sustainable living to a commonplace. We believe this is the best way to deliver long-term sustainable growth.”

Unilever Operating segments

During 2017, Unilever operated across four categories.

  • The largest was Personal Care,
  • followed by Foods,
  • Home Care
  • and Refreshment

unilever-turnover-growth

Source: Unilever annual report for 2017

Personal care is the largest segment in terms of revenues and also the most profitable regarding operating margins. It comprises brands like Axe, Dove, and Sunsilk.

Unilever Direct-To-Consumer Business Model Based On A Global Value Chain

unilever-value-chain

Source: Unilever annual report for 2017

Unilever has been able to create a global value chain. This value chain is based on a direct-to-consumer business model, which requires a deep understanding of consumers and what brands they want to relate to. Therefore, Unilever leverages on massive marketing campaigns that aim at establishing a connection between consumers and those brands.

Besides its claimed value chain, for sure the strength of Unilever is based on its ability to quickly adapt to economic scenarios, to purchase or push brands that can sell well during those periods.

The critical ingredient is to structure the R&D for its product development, in a way that is coordinated with marketing activities. While the company gathers insights about consumers, used for product development. Indeed, Unilever spent over nine hundred million euros in R&D in 2017 alone.

Unilever Massive Distribution Strategy

In addition, the company can provide a proper distribution to its brands by working with thousands of suppliers across the world, with a massive supply chain that purchased over thirteen billion in ingredients and raw materials for its products and brands.

Those materials are turned into finished products, based on consumer insights, and manufactured in more than three hundred factories in sixty-nine countries. The distribution and direct access to consumers via a network of more than four hundred warehouses and twenty-five million retail stores.

Among direct-to-consumer channels, Unilever brands and products are served in:

  • hypermarkets
  • wholesalers and cash and carry
  • small convenience stores
  • other fast-growing channels such as e-commerce
  • out-of-home and direct-to-consumer

All those channels are critical to Unilever brands to make them properly available and displayed. A significant part of this distribution is also accompanied by massive spending in marketing campaigns, that in 2017 alone saw over seven billion euros in spending.

The company also uses digital channels to create a target and more personalized campaigns based on consumer insights. And in doing so, our value chain cycle repeats itself.

unilever-financials-and-expenses

Source: Unilever annual report for 2017

To notice how among the most significant piece of the pie regarding spending the company leverages on distribution costs, brand, and marketing investments. That’s how the value chain is created.

Summary and conclusions

Unilever leverages on a direct-to-consumer business model that in 2017 made over fifty billion in revenues. The key ingredients of this value chains are consumer insights that are used in their R&D strategy, that goes back to product development. Also, the company leverages on massive branding campaigns to make those brands on top of minds of its consumers.

Reference for the financials: Unilever 2017 Annual Report

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Gennaro Cuofano

Creator of FourWeekMBA.com | Head of Business Development at WordLift.io | International MBA

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