Unilever: When British Soap Meets Dutch Margarine
So I’ve got a question for you today, what is a company’s main responsibility? Is it just to make as much money as possible, or is it more than that? In recent years, a lot of brands try to appear as if they care about causes like saving the environment or offering fair wages. But is that all just a PR exercise? Today, we’ll try to answer that question by looking at how Dutch margarine and British soaps spread their way across the world, bringing an incredible range of products, a bucket load of ice cream, and some major controversy. This is the history of Unilever.
Unilever is Everywhere
When you walk into a supermarket, especially in the U.S., it’s estimated that over 75% of the products on sale actually come from just 10 companies. It might seem like an endless sea of brands, but if you follow the money up high enough, it often ends up with one of these very, very big fish. Unilever might not be the largest, that honor goes to Nestle, but they are probably the most diverse.
You could wake up, brush your teeth, shower, make breakfast, clean the house, make lunch, have dessert, and you know what, you could easily have used only Unilever products for the entire day. Unilever has four internal categories for its products. Personal care, like shampoo and toothpaste, foods like the stuff you put in your mouth, refreshment, that’s ice cream and tea mainly, and finally, home care, laundry detergent, and soap, for example.
So while it makes sense for a supermarket to sell all of these products, why are they all made by Unilever? Well, the simple answer is fat. Over the years, the chemistry of most of their products has changed dramatically, but Unilever came about thanks to the 1929 merger of a Dutch margarine producer, Margarine Uni and a British soap maker, the Lever Brothers. Back then, the key ingredient in both their products was animal fat.
Margarine Uni was itself a merger of two different margarine makers, who’d started out in the 1870s and 1880s. Lever Brothers began in 1885 and was fueled by its main brand, Sunlight, the world’s first packaged branded laundry soap. Their merger was really just to help both with the supply of fat.
Fat & Ice Cream
To this day, Unilever is actually a joint venture between the two parts, rather than a legal merger. This was to avoid all the tax levies that would be due by setting up entirely in London or entirely in Rotterdam. So there is Unilever NL and Unilever PLC. One floated on the stock exchange in Amsterdam and the other one on the one in London. They do give their sharers equivalent value and have the same Board of Directors, so it technically operates like one economic entity.
In the first few decades, they launched or acquired some of their most enduring brands, which are now each worth over a billion dollars. By the 1970s, for example, they controlled over 30% of Western Europe’s ice cream market. They’ve gone on to sell almost a quarter of all the ice cream in the world today.
They mostly use their heart brand logo and keep the original name of the products they’ve taken over, like Frisko in Denmark, or Tio Rico in Venezuela. Naturally, their strategy is to focus on impulse purchases, like freezer stands in the park, or by the counter in a convenience store. But they hit problems with monopoly law, and in the year 2000, the U.K. government decided that Unilever were illegally blocking competition by renting freezer cabinets to retailers on the condition that they would only stock Unilever products.
You may think that this is pretty much standard practice for businesses, and you’d be right, but the sheer volume and variety of unethical behavior Unilever has exhibited is incredible.
A Pile of Legal Issues
First up, there’s price-fixing cases. In January 2002, Unilever, Proctor and Gamble, and German company Henkel agreed to fix prices on detergents for three years. Unilever and P and G were fined over 300 million Euros, while Henkel got off for ratting them out. Did Unilever learn their lesson though? Not really, no. They’re on trial again, this time in South Africa for price-fixing with a big Malaysian conglomerate.
The watchdog handling this case wants 10% of their local turnover as a fine. On an ecological level, Unilever have played a part in the devastating impact that palm oil has had on the environment. Indonesia is losing 2% of its rainforest every year, with palm oil production being the biggest cause for that, which coincidentally involves many of Unilever’s suppliers. In 2016, they had to settle a long-running allegation that they had poisoned hundreds of Indian workers with Mercury. And the list of controversies goes on and on.
However, here is where a new character enters our story. Paul Polman originally wanted to become a priest in his native Netherlands, but instead, he chose a slightly less holy path by joining Proctor and Gamble and then Nestle. Finally, he became CEO of Unilever and promised to enact radical changes. He wanted to cut the company’s environmental impact in half by 2020, to help improve the health of a billion people, and to still double sales despite that.
A New Hope: Unilever Today
The interesting thing is that Polman is actually making some serious progress. Emissions are way down, there’s 85% less waste going to landfills, and Polman is out there actively pushing for stricter environmental controls. That’s not to say there aren’t still plenty of issues, but here’s the real problem.
Is it possible for a company of this size to achieve true sustainability? Unilever have such an enormous range of products that tackling every single ingredient will likely take a lifetime of effort. If it’s not palm oil in Indonesia, it’s soybeans in the U.S., or vanilla from Madagascar. We have become very cynical about big business, and for good reason, so it’s hard to have complete faith that Unilever actually wants to help rather than just improve its image. But maybe Polman is simply doing the most he can, accepting that some improvement is better than none.
Today, Unilever is growing but it’s less than expected, and this led to a takeover attempt by Kraft-Heinz for $143 billion in February 2017. That offer was rejected, and many people believe that’s because Polman values his sustainability plan above everything else.
Some shareholders are calling for his head, saying his responsibility is to them first and only, but then again, those people aren’t working minimum wage on a farm in Pakistan. Of course, the bottom line is that consumers always vote with their wallets, showing their ethics through their purchase. Hopefully, Unilever will take the right steps in the future so that people will actually feel proud of what they buy.
If you want to congratulate Unilever on their eco-friendly changes, give them a clap. In fact, why not give them 50; they earned it! 👏👏 And be sure to check our YT channel to find more awesome content.
