ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, September 5, 1996 TAG: 9609050062
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: LONDON
SOURCE: The Wall Street Journal
NIALL FITZGERALD, the company's new co-chairman, is looking to sell some of its 57 businesses, which range from heavy equipment to olive oil.
Niall FitzGerald, the new co-chairman of Unilever NV, says growing a business is like tending a garden: It occasionally needs weeding.
The 50-year-old executive, who officially took control of Unilever's British arm Sunday, is about to prove whether he has a green thumb.
In the next few years, FitzGerald intends to oversee one of the most aggressive sell-offs of businesses and brands in the long history of the Anglo-Dutch consumer-goods giant. Of Unilever's $50 billion in annual revenue, from famous names such as Lipton teas and Calvin Klein perfume, about $10 billion is under review, FitzGerald said.
Unilever also is the parent of Elizabeth Arden Co., a cosmetics and fragrance company with manufacturing and shipping facilities in Roanoke.
If businesses ``aren't creating value, we shouldn't be in them,'' FitzGerald said. ``It's like having a nice garden which gets weeds. You have to clean it up, so the light and air get in to the blooms which are likely to grow the best.''
The pruning is overdue. Unilever operates 57 businesses ranging from heavy equipment to olive oil, and has identified fewer than half as priorities. Yet analysts are only cautiously optimistic that FitzGerald, working with his Dutch co-chairman, Morris Tabaksblat, will be able to scythe through the conglomerate's massive bureaucracy.
In more than 100 years, Unilever has grown into such an unwieldy hodgepodge of businesses that one analyst speculates some Unilever executives ``don't know how many businesses they're in.''
``It's a bit like trying to turn a supertanker around on a sixpence,'' said Nicola Mallard, analyst with Charterhouse Tilney Securities here. ``The difficulty is that he's dealing with a company where the momentum for profit growth and sales growth coming through at the moment was established years ago. It's difficult to see what he can do in the short term.''
FitzGerald plans to start by culling a slew of smaller, underperforming brands and companies outside the company's priority categories of ice cream, margarine, tea, detergents, skin-care products and prestige cosmetics and fragrances.
Two likely candidates are fish businesses in Britain and Germany. The company already has announced plans to sell a British franchiser of Caterpillar Inc. heavy equipment with annual sales of about $390 million.
The company is disposing of its few remaining animal-feed businesses, as well as some oil-processing operations. In March, Unilever also sold its mass-market cosmetics business.
FitzGerald said Unilever is expected to spend about $2.1 billion in the next five years restructuring its European and American consumer-goods businesses. One likely change: the merger of its two U.S. food businesses, Van den Bergh and Lipton. Analysts say a merger of the Chesebrough-Ponds unit with newly acquired Helene Curtis might also be in the works.
While the decision to sell weak businesses is hardly radical, analysts said they would be surprised if Unilever managed a rigorous pace of disposals. ``Unilever has been selling businesses consistently for more than a decade,'' said a London consumer-products analyst who declined to be identified. ``The question is: Will we see a more aggressive approach?''
Moreover, while divesting itself of some units, Unilever still will make acquisitions to shore up key product lines. So far this year, it has bought 24 businesses.
Unilever, created in 1929 through the merger of the Dutch-owned Margarine Unie and the Britain-based Lever Bros. soap business, is in desperate need of an overhaul. In recent years, aggressive pricing by archrival Procter & Gamble Co. has taken its toll on Unilever's bottom line, as have a consumer recession in Europe and the onslaught of powerful store brands. In addition, the market for margarine and other fats, which represent about 20 percent of Unilever's sales, is shrinking in Europe and North America.
The company's profit has been on a seesaw, increasing in 1992, falling in 1993 because of heavy restructuring charges, back up again in 1994, only to drop 2.5 percent last year to 2.32 billion. In the second quarter, Unilever reported lackluster pretax profit of 616 million, a 6 percent drop from a year earlier because of costs associated with its $770 million acquisition of Helene Curtis.
In his bid to boost Unilever's fortunes, FitzGerald has one distinct advantage: He is one of its youngest chairmen ever, and has about 10 years before retirement to make his mark. As if to punctuate his youthfulness, FitzGerald hopes to become the first Unilever chairman to run in the London Marathon, sponsored by his company's Flora margarine brand. And he once requested a motorcycle as his company car. The request was denied.
Yet the man who many hope will change Unilever also ran its detergent business during the failed launch of the Power brand two years earlier, an event described by Unilever's former chairman as the company's ``greatest marketing setback.'' Following complaints, Unilever withdrew the brand, conceding that it damaged clothes.
At Unilever, FitzGerald is widely known for arguing that the company is too ``risk-averse'' and to have pushed employees to be more enterprising. FitzGerald said the fact that he not only survived the detergent debacle but also was promoted proves Unilever is changing. If he had become ``the first major victim'' of his advocacy of risk-taking, he said, ``it would be a long time before anyone in this business ever took a risk again.''
Staff writer Megan Schnabel contributed to this story.
LENGTH: Medium: 99 linesby CNB