Unilever UK’s “Drastic” Dave Lewis has further streamlining to do but is also eyeing acquisitions. Liz Hamson met him
In his Unilever-branded rugby shirt, Dave Lewis cuts a calm, confident figure. And understandably so. While the recession is forcing rivals to implement savage restructuring and job cut programmes, the UK and Ireland chairman has been there and done that, memorably earning himself the epithet Drastic Dave in the process.
Two years on and with the bulk of the bloodletting behind him, the sports-mad 44-year-old is these days described by City analysts not as “drastic” but “a good guy” who’s done “a good job” knocking a somewhat sleeping giant into better shape.
Lewis still has further streamlining to do - chiefly of the business’s 2,500 SKUs, he reveals in a frank interview at Unilever’s new state-of-the art Leatherhead office - but his main focus now is on the top line. He is also eyeing UK-based acquisitions and pressing ahead with NPD, he says. “The short-term economic situation is difficult, but we are very much looking to the medium and long term. The fact we can lean on the financial structure of Unilever is really very helpful. Unilever has a better credit rating than the Government.”
And while Lewis is just as circumspect about the outlook as global chief executive Paul Polman - who controversially declined to give a profit forecast for 2009 - Lewis is confident the €2.8n UK and Ireland business will come out of the recession stronger than it went in.
Career: Joined Lever Brothers UK in 1987, rising to company operations manager in 1993. In 1996, was appointed marketing and brand development director, Unilever River Plate (Argentina, Uruguay, Paraguay) and Innovation Leader Household, Latin America. Became MD personal care Indonesia and innovation leader South East Asia in 1999 and senior vice president general and Eastern Europe in 2001. Took on the role of MD, Lever Fabergé UK in 2005 and chairman of Unilever UK in 2007 before taking on the additional responsibility of Ireland last January
Other responsibilities: Sits on the FDF Executive Committee, the IGD Policy Issues Council, the CBI Presidents Committee and is vice chairman of the Advertising Association
Family: Lives in Weybridge and has two daughters
Hobbies: His interests include anything associated with sport
His bullishness derives in no small part from the support he has received from Polman. “He looks to me to say: this is the business we have, this is the business I think we can have and this is how I think we should play,” says Lewis as he settles into his seat at the round table in Unilever’s novel supermarket-style boardroom. “He’s very supportive of the changes made over the past 18-24 months.”
It’s hardly surprising, however. Unilever had been losing market share for more than a decade and was seen, says Lewis, as “old, respected and slightly deferential”. Before embarking on the restructuring, Lewis assessed the business using the sort of metrics a private equity company eyeing an acquisition would use. He admits he was shocked by the results. “We were about 35% off a world-class standard in terms of the cost of running the business.”
Cutting operational costs wasn’t the only challenge. While some retail customers were happy with their relationship with the supplier, others felt it was lagging behind a number of rivals, including its oldest foe - P&G - and Reckitt Benckiser. There were internal issues as well. “One of the things that really did strike me coming back was that staff talked about Unilever in the third person. Who is Unilever if it’s not us?”
Under the era of Drastic Dave, 40% of the cost was slashed from the business, nine factories were restructured, 12 distribution centres were reduced to five and three business units were united under one roof at Leatherhead.
Lewis also started work building what he describes as Team Unilever, which is where the rugby shirts come in. Former All Blacks rugby captain Sean Fitzpatrick was one of several inspirational speakers invited in to talk about team spirit. “His great quote was there are four million shareholders in this shirt and every one of them demands you perform,” he recalls. “The idea is you’ve got to be good to work here. The old days, [when] Unilever [was] a bit sleepy, is not really where I want us to be. The reason I’m so proud of the people who wear the shirt is that they’ve transformed the business in less than 18 months. For the first time in more than a decade we’re growing the market share of the business.”
The impact on morale of this and the new “We are Unilever” motto emblazoned in the foyer has been tangible, says Lewis, especially when it came to announcing the salary freeze and travel budget cut. “You think that when you announce a freeze everyone’s going to go ‘Oh my god’,” he says. “The reaction we got in this building was really phenomenal. The feedback was that it’s the right thing to do.”
Lewis is confident there won’t be any need for job losses or further major restructuring. “If I can maintain the competitiveness of the top line of the business then I’m pretty clear I’m not in a place where I need to restructure the marketing and the sales organisation,” he says. “Any discretionary spend we can defer, we will. But at this moment in time, I think we are the lowest-cost business Paul has, so we’re a pretty tight team.”
That doesn’t mean that areas of the business won’t be reviewed. “Outside my marketing and sales organisation there are things I can look at,” he elaborates. “Should we manufacture more in the UK? In terms of the supply chain, are there better ways of configuring and attracting volume given the exchange rate? “
The supply chain is not all that’s being reassessed. Unilever’s Path to Growth programme, from 2001 to 2006, reduced the number of brands in the portfolio from 1,600 to 400. The next phase - also aimed at growth - will focus not on cutting brands, but on cutting SKU proliferation. Lewis reveals that, by the end of the year, Unilever will have reduced its 2,500 SKUs by 40%, half through strategic rationalisation and half through natural churn. “We’ll take stock and complexity out of the tail of the business and put it into improving the service and availability and the volume part,” he elaborates. “It’s a way to improve service and manage working capital. I don’t want to be tying up a huge amount of money in working capital that’s not productive.
“No brands will disappear. This is all about efficiency. I have nothing that I’m actively looking to dispose of.”
Rather the reverse, in fact. Lewis is eyeing three acquisitions - though Innocent has now been ruled out. Unilever has been widely touted as a good fit for Innocent, which is looking for minority-stake investors to fund its European expansion, because of the multinational’s successful integration of Ben & Jerry’s. Lewis admits to looking at Innocent but pulled out. “We have tried with things like AdeZ and Vie to go into similar territory. We decided that the market in a UK context is not attractive for us.”
Unilever’s lack of interest may also be down to price. Explaining the rationale for acquisitions, he says: “I might want to buy a lot of things - but these things always depend on whether they want to sell and for what price.”
Some will be surprised to learn that Unilever is on the lookout for national as opposed to global opportunities. Lewis gives an insight into how the relationship with the London-based mergers and acquisitions team works. “If they come up and say, Dave what about X, I will look at X and give them a view,” he explains. “It also goes the other way, so I might say I think there’s a brand here that is great for my portfolio. Ultimately Paul and the FD say they’re interested or not interested and if it’s local, I’ll pursue it, if international, it’ll be pursued at an international level.”
Though the big four are aggressively pushing own label, Lewis is dismissive of suggestions that brands, particularly at the premium end of the spectrum, are vulnerable. He cites the popularity of Knorr stock pots, premium fabric conditioners and premium deodorants.
If he’s concerned about anything, it’s unpredictable behaviour. “As people try to protect their volume, we’re seeing some quite irrational deals,” he explains. “Forecasting the promotional uplift now is much more difficult than it was only six months ago. If our competitors pushed it really hard, we might still be in the red despite what we did.”
So far only one of its top nine categories - spreads - is in that position, though as The Grocer went to press, Unilever was expected to post some stronger figures. Meanwhile, innovation remains a priority. “I haven’t taken any of the innovation out of the plan this year. What I can’t judge is how much money will be spent in total - that’s a very dynamic piece of management - but I believe in the UK market long term and I believe in innovation.”
Much of the R&D is now orchestrated at a global level, but Lewis is particularly excited by ice structuring proteins, which are close to receiving formal EU approval under the Novel Foods Directive and could signal a whole new direction for ice cream NPD, allowing it to make a full-flavour ice cream with lower levels of fat. Approval will be too late to influence this year’s R&D programme, but not next year’s.
Lewis is also keeping his fingers crossed that a back injury won’t stop him taking part in the final Flora Marathon, on 26 April. Unilever’s senior management boasts a disproportionate number of marathon runners, Polman and new Western European boss Doug Baillie to name but two. Last year was Lewis’s first.
“I’ve never been more nervous in my life,” he recalls. “I was thinking I’m not sure I can do this.” Lewis got through the hardest bit by listening to his iPod.
“I’d made a list of the best running music I knew and worked out I could listen to three songs a mile. There are six miles everyone tells you are terrible and the 18 songs just went by. I lost myself in music.”
What was that music? Eminem, Robbie Williams, The Fray. Fortunately, Lewis’s influences when it comes to running
Unilever are rather more inspired.
This week, Belgian retailer Delhaize ended its boycott of 250 Unilever products. Lewis says such a scenario is unlikely to arise in the UK. But the feud underscores the universal tension between retailers and manufacturers as the former strive to keep prices down while the latter come under increasing pressure as a result of rising costs. It also coincided with Asda announcing it would be culling up to 30% of its brand offer in some categories.
While not exactly sanguine about the impact of the mults’ shift to own label on his business, Lewis says he has had no choice but to take it on the nose. “Part of our turnaround has been about how we engage in a way that puts our customers at the heart of our agenda,” he says. “The idea of gettting a portfolio that is number one or two in the category is hugely helpful. We need to show customers that the brands we offer are brands consumers want to buy.”
Lewis claims there are only two categories in which Unilever operates where it is not number one or two. However, he ponders how close the market is to becoming over-promoted, and though he is keen for the significance of the price wars not to be overplayed, he is frank about the predicament for suppliers . “The price wars per se are much more an issue for retailers than us. That said, you’ve got a vice going on where suppliers have cost going up as a result of the exchange rate and an environment that says taking a price rise at the minute is really very hard.”