Unilever 2009 Annual Report Download - page 8

Delivering growth in a tough year
At the beginning of 2009 we took a long-term view, dropping
guidance and setting the objective of restoring volume growth
while protecting cash flow and underlying operating margin. As
well as managing the short-term challenges, we increased support
behind our brands and invested in R&D and people – the surest
route to long-term shareholder value creation.
Volume growth was 2.3%, with acceleration throughout the year.
This was driven by sharper execution and strong innovations,
supported by incremental investment behind our brands in
advertising and, to a lesser extent, promotions. Underlying sales
growth was 3.5%.
Growth was broad based across markets and categories. By the
end of the year we were growing volume share in two thirds
of our business, compared with only one third a year earlier. Our
competitive position strengthened during the year. Our biggest
brands are getting stronger – ten of the top 13 brands are gaining
volume share.
Good cost discipline meant that underlying operating margin was
up 0.2% to 14.8% and tight working capital control meant cash
flow from operating activities increased by €1.4 billion.
How we delivered
Recognising the severity of the economic crisis early and responding
quickly was key to our strong performance, even if it meant some
tough choices. The focus on volume growth, combined with
protecting margins and cash flow, proved to be the right drivers
in the current environment.
We targeted four key areas of activity:
Bigger and better innovations, rolled out faster and to more markets
Our innovations are getting bigger and better. The One Unilever
structure allows for faster roll-out across multiple geographies.
Dove Minimising Deodorant, for example, was rolled out across
37 markets; Signal White Now to 21 markets and Knorr Stockpots
to 12 markets; Clear shampoo is now in 35 markets; and following
its launch at the end of 2009, Dove for Men will be rolled out
across 50 markets. Our innovation pipeline is equally getting
stronger. The number of innovations in the pipeline with
an expected incremental turnover in excess of €50 million has
doubled. The opening of a new research centre in Shanghai, our
second in the emerging markets, reflects a long-term commitment
to R&D. Innovation will continue to be the key growth driver for
your company. The business publication Fast Company recently
recognised us as the fourth most innovative company in
advertising and marketing.
More discipline throughout the organisation
Serving the consumer and customer with increasing passion
every day is critical to our success. To help develop categories and
accelerate our growth with our customers we have created a new
global customer supply structure and are rolling out state of the
art customer innovation centres to all regions. Our progress was
recognised: we gained supplier of the year awards from a number
of top customers. In a performance culture, we are increasingly
focused on disciplined execution.
A more competitive cost structure
Our emphasis on protecting short-term business fundamentals
meant driving out costs that do not add value for consumers and
customers. This included accelerating much needed restructuring
projects, leveraging scale by moving to global procurement,
establishing regional sourcing organisations across each of
our geographies and simplifying and further streamlining our
organisational structure. In total we achieved savings of over
€1.4 billion, well ahead of target and which helped fuel investment
behind our brands. By adopting best practices we also made
significant improvements in working capital (€1.9 billion).
Driving a performance culture
We start from a strong base of values and principles, which have
served us well over the years: integrity, trust, investing in people,
doing the right thing for the long term. In very competitive
markets, we need to further increase consumer and customer
focus, speed of action, and responsibility and accountability.
To achieve this we have made the organisation flatter, simplified
target setting and sharpened individual performance management.
The organisation rose to the challenge, showing its competitive
strength in managing change. I am proud to work with a strong
leadership team and a dedicated group of colleagues throughout
the world. The results in 2009 are a testament to their passion,
commitment, skill and hard work.
Chief Executive
Officer’s review
Despite a challenging economic environment it
has been a good year for Unilever. We exceeded
objectives while at the same time taking action
to ensure the future success of your company.
Paul Polman
Chief Executive
Officer
Unilever Annual Report and Accounts 2009 5