It is a tough time for producers of branded consumer goods. Unilever and its competitors have to cope with pressure on prices and stiff competition from supermarkets' own brands, Colgate-Palmolive warned of lower profits on the 'same day, Nestle recently disappointed investors with its latest results. Even so, Unilever admits the bulk of its troubles are self-inflicted. The "Path to Growth" strategy aimed to make the firm more efficient. Unilever saved about 4 billion euro ($4.9 billion) in costs over the past five years and reduced its portfolio of brands front 1,600 to some 450, but it still failed to meet its targets for profit and sales, reporting a sales decline of 0.7% for the second quarter of this year.
Andrew Wood at Sanford Bernstein, an investment-research firm, thinks the main problem is under-investment in advertising and marketing, an infatuation with brands and unrealistic performance targets. Unilever cut its ad and marketing expenditure at the worst moment, says Mr. Wood. Commoditised products are especially vulnerable to the onslaught of retailers' own brands. In margarine, for instance, retailers' own brands now capture as much as one-fifth of the market. Unilever also over extended some successful brands, for instance Bertolli's olive oils and pasta sauces. According to Mr. Wood, Unilever can sustainably grow its business about 3% a year; it was shooting for 5-6%.
Unilever's chief financial officer (CFO) counters that consumers look for a product and then buy a brand, so his firm needs to focus on brands. Unilever intends to step up its marketing efforts, al though ad spending is supposed to remain at current levels. At present, Unilever spends 14.5% of sales on ads. But even the CFO admits the company has "issues of competitiveness". After seven quarters of disappointing performance, it needs to regain credibility with investors. Over the next few months, management will rethink its strategy for the next five-year plan. Patrick Cescau, a Frenchman who will take over from Mr. FitzGerald, is inheriting a tricky legacy.
Which of the following about "Path to Growth" strategy is true?
A.It is hard to carry out.
B.It has a glorious history.
C.it underlines Unilever's brands.
D.It brings high growth.
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