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Unilever and P&G took different development measures in China.
The Anglo-Dutch multinational corporation Unilever hopes to go on the way featured with balanced development of daily chemicals and food. Its mainly rival, Procter & Gamble (P&G) are peeling off its supplementary businesses apart from the daily chemicals and focuses on the fashionable and cosmetic products. The two companies have begun to go on different ways in China.
After moving its plant from Shanghai to Hefei, Anhui eight years ago, Unilever began to pay attention to West China. In these months, many senior executives paid their visits to a county in Changsha, Hunan. They have not made up their minds whether they should build another manufacturing base with the total production larger than the one in Hefei. The first project is likely to be an ice cream factory.
The moving inland of Unilever was not only attributed to saving cost. For Unilever, developing its food business in the inland provinces of China is much more important. Its ice cream brand – Wall’s – is far behind Monmilk and Yili in the market share. The main reason is that it has difficulties in the distribution in the second- and third-tier cities.
However, Unilever’s peer P&G has been frequently reported of peeling off its supplementary business. In addition, compared with Unilever’s moving westward, P&G chooses to stay in the coastal area.
The Suspense in Ningxiang
After visiting the aforementioned county in Hunan – Ningxiang County, the executives of Unilever still failed to make up their minds.
The Changsha municipal government showed great enthusiasm in getting Unilever’s manufacturing base in Ningxiang. The government officials even went to the headquarters of Unilever in Shanghai to persuade the senior executives of Unilever to make up their minds quickly. It is said that Xiamen and Chengdu also want Unilever’s project to be loacted there.
Unilever’s goal was to find a good location for its ice cream brand Wall’s. The delegation visiting Ningxiang included the director of Unilever’s global supply chain of ice cream.
According to the Changsha government, if Unilever decides to build the manufacturing base in Ningxiang, the project will cover 32 acres and the products will be sold in South China, Hong Kong, Macau and southeast Asia. The production value of ice cream will reach 1 billion yuan (USD 147.6 million) in 2020.
Zeng Xiwen, vice president of Unilever China, said that the company was still making a survey on the new project and no decision was available yet.
According to Zeng Xiwen, Unilever has decided not to open the plant of Wall’s in Hefei. Presently, there are two plants of Wall’s ice cream in Beijing and Taicang, Jiangsu. For the frozen products, the supply chain that covers 500 to 800 km is the most rational. Hefei is within the coverage of Taichang plant’s supply chain. In addition, Unilever doesn’t have a base in West China. Therefore, giving up Heifei was related with geographical factor, not the investment environment.
Right now the base in Hefei can see the annual production value of 10 billion yuan (USD 1.48 billion) and it is one of the four biggest bases of Unilever in the world. If the project in Ningxiang was approved, the production value will reach 14 billion yuan (USD 2.07 billion) in 2020, bigger than the one in Hefei.
Such a large project needs careful consideration before being approved.
Change of Unilever’s pattern in China
Early in 2002, before the production cost began to haunt the foreign companies in the coastal areas of China, Unilever decided to move its factories from Shanghai to Hefei.
The move was finished in 2004, when the six out of seven plants of Unilever in Shanghai was removed but a condiment factory.
Zeng Wenxi attributed this move to the problem of electric power supply. Shanghai needs to import electric power from the other provinces while Anhui is one of the suppliers.
Cost was also another reason. According to a government official from Hefei, Unilever’s moving its plants from Shanghai to Hefei could save 30% of its cost.
The official said that the monthly salary of the workers for Unilever in Hefei is 2,000 yuan (USD 295.2). The company has expanded its base in Hefei for several times and 20 brands of Unilever are produced there.
An insider in Unilever said that the move was also expected to centralize the management on the factories in Hefei and unify the supply chains.
When Unilever got into China, it acquired a lot of local enterprises, which were scattered all over China, increasing the difficulty in management. Some of the enterprises went upward because of insufficient management.
In September 2009, the newly-appointed Unilever CEO Paul Polma visited Shanghai and Hefei. Polman once served P&G for 26 years. His visit to China was to state the role of Unilever in China. After the visit, Unilever moved all of its factories in Shanghai and invested 50 million euros in buidling a research and development center in Shanghai. It was one of the six major R&D centers of Unilever in the world. Hefei was where the manufacturing base was located. Polman also stated his interest in investing in West China.
Before the move, 2500 out of 2700 emloyees of Unilever in Shanghai were production workers. Now most of the 2200 workers in Shanghai are engaged in research and development.
Balance between Food and
Daily Chemicals
Another reason to drive Unilever to move inland is its food business.
The aforementioned insider said that the food enterprises were all restricted by the coverage of its supply chain. The dairy products should be sent within 500 km around their places of origin. The condiment also has its own most ideal coverage of supply chain. The requirement for ice cream and some other frozen food is much stricter.
Unilever and P&G have different opinions towards the food industry.
In the official website of Unilever, the No. 1 business is food, followed by home care and personal care. In Europe, many people consider Unilever as a food company whose products include Wall’s ice cream, Lipton tea and many kinds of condiments.
Meanwhile, P&G keeps losing its weight. The senior executives of P&G says that the company intends to focus on fashionable and cosmetic products, In 2009, the Wall Street analysts forecasted that P&G would peel off its food business and turned to the acquisition of Estee Lauder, Shiseido and some other high-end cosmetics.
Unilever wants to seek the balance between food and daily company and doesn’t want to be a simple food company nor a daily chemcial company. The company once divided its business into daily chemical, food and ice cream and then combines the food and daily chemical together while ice cream was still an independent department.
In 1994, Wall’s ice cream got in China. Unilever took the pattern of sending freezers to the distributors of its ice cream to increase its market share and saw great success. However, local competitors began to borrow this method. In 1998, Unilever acquired the ice cream brand “Mandenglin”. According to the report, Wall’s ice cream was expensive and Unilever wanted to use “Mandenglin” to take the low-end market. But the brand disappears gradually. So Unilever’s acquisition was thought to be fruitless.
In 2002, Wall’s ice cream finaly saw profits in China, a good return to Unilever’s commitment.
Presently, local ice cream producers Monmilk and Yili are taking the market share several times larger than Wall’s. The performace of Wall’s in China is far from its performace in the world. According to Zeng Xiwen, the largest difficult for Wall’s to expand is how to enter into the markets of small cities.
The Anglo-Dutch multinational corporation Unilever hopes to go on the way featured with balanced development of daily chemicals and food. Its mainly rival, Procter & Gamble (P&G) are peeling off its supplementary businesses apart from the daily chemicals and focuses on the fashionable and cosmetic products. The two companies have begun to go on different ways in China.
After moving its plant from Shanghai to Hefei, Anhui eight years ago, Unilever began to pay attention to West China. In these months, many senior executives paid their visits to a county in Changsha, Hunan. They have not made up their minds whether they should build another manufacturing base with the total production larger than the one in Hefei. The first project is likely to be an ice cream factory.
The moving inland of Unilever was not only attributed to saving cost. For Unilever, developing its food business in the inland provinces of China is much more important. Its ice cream brand – Wall’s – is far behind Monmilk and Yili in the market share. The main reason is that it has difficulties in the distribution in the second- and third-tier cities.
However, Unilever’s peer P&G has been frequently reported of peeling off its supplementary business. In addition, compared with Unilever’s moving westward, P&G chooses to stay in the coastal area.
The Suspense in Ningxiang
After visiting the aforementioned county in Hunan – Ningxiang County, the executives of Unilever still failed to make up their minds.
The Changsha municipal government showed great enthusiasm in getting Unilever’s manufacturing base in Ningxiang. The government officials even went to the headquarters of Unilever in Shanghai to persuade the senior executives of Unilever to make up their minds quickly. It is said that Xiamen and Chengdu also want Unilever’s project to be loacted there.
Unilever’s goal was to find a good location for its ice cream brand Wall’s. The delegation visiting Ningxiang included the director of Unilever’s global supply chain of ice cream.
According to the Changsha government, if Unilever decides to build the manufacturing base in Ningxiang, the project will cover 32 acres and the products will be sold in South China, Hong Kong, Macau and southeast Asia. The production value of ice cream will reach 1 billion yuan (USD 147.6 million) in 2020.
Zeng Xiwen, vice president of Unilever China, said that the company was still making a survey on the new project and no decision was available yet.
According to Zeng Xiwen, Unilever has decided not to open the plant of Wall’s in Hefei. Presently, there are two plants of Wall’s ice cream in Beijing and Taicang, Jiangsu. For the frozen products, the supply chain that covers 500 to 800 km is the most rational. Hefei is within the coverage of Taichang plant’s supply chain. In addition, Unilever doesn’t have a base in West China. Therefore, giving up Heifei was related with geographical factor, not the investment environment.
Right now the base in Hefei can see the annual production value of 10 billion yuan (USD 1.48 billion) and it is one of the four biggest bases of Unilever in the world. If the project in Ningxiang was approved, the production value will reach 14 billion yuan (USD 2.07 billion) in 2020, bigger than the one in Hefei.
Such a large project needs careful consideration before being approved.
Change of Unilever’s pattern in China
Early in 2002, before the production cost began to haunt the foreign companies in the coastal areas of China, Unilever decided to move its factories from Shanghai to Hefei.
The move was finished in 2004, when the six out of seven plants of Unilever in Shanghai was removed but a condiment factory.
Zeng Wenxi attributed this move to the problem of electric power supply. Shanghai needs to import electric power from the other provinces while Anhui is one of the suppliers.
Cost was also another reason. According to a government official from Hefei, Unilever’s moving its plants from Shanghai to Hefei could save 30% of its cost.
The official said that the monthly salary of the workers for Unilever in Hefei is 2,000 yuan (USD 295.2). The company has expanded its base in Hefei for several times and 20 brands of Unilever are produced there.
An insider in Unilever said that the move was also expected to centralize the management on the factories in Hefei and unify the supply chains.
When Unilever got into China, it acquired a lot of local enterprises, which were scattered all over China, increasing the difficulty in management. Some of the enterprises went upward because of insufficient management.
In September 2009, the newly-appointed Unilever CEO Paul Polma visited Shanghai and Hefei. Polman once served P&G for 26 years. His visit to China was to state the role of Unilever in China. After the visit, Unilever moved all of its factories in Shanghai and invested 50 million euros in buidling a research and development center in Shanghai. It was one of the six major R&D centers of Unilever in the world. Hefei was where the manufacturing base was located. Polman also stated his interest in investing in West China.
Before the move, 2500 out of 2700 emloyees of Unilever in Shanghai were production workers. Now most of the 2200 workers in Shanghai are engaged in research and development.
Balance between Food and
Daily Chemicals
Another reason to drive Unilever to move inland is its food business.
The aforementioned insider said that the food enterprises were all restricted by the coverage of its supply chain. The dairy products should be sent within 500 km around their places of origin. The condiment also has its own most ideal coverage of supply chain. The requirement for ice cream and some other frozen food is much stricter.
Unilever and P&G have different opinions towards the food industry.
In the official website of Unilever, the No. 1 business is food, followed by home care and personal care. In Europe, many people consider Unilever as a food company whose products include Wall’s ice cream, Lipton tea and many kinds of condiments.
Meanwhile, P&G keeps losing its weight. The senior executives of P&G says that the company intends to focus on fashionable and cosmetic products, In 2009, the Wall Street analysts forecasted that P&G would peel off its food business and turned to the acquisition of Estee Lauder, Shiseido and some other high-end cosmetics.
Unilever wants to seek the balance between food and daily company and doesn’t want to be a simple food company nor a daily chemcial company. The company once divided its business into daily chemical, food and ice cream and then combines the food and daily chemical together while ice cream was still an independent department.
In 1994, Wall’s ice cream got in China. Unilever took the pattern of sending freezers to the distributors of its ice cream to increase its market share and saw great success. However, local competitors began to borrow this method. In 1998, Unilever acquired the ice cream brand “Mandenglin”. According to the report, Wall’s ice cream was expensive and Unilever wanted to use “Mandenglin” to take the low-end market. But the brand disappears gradually. So Unilever’s acquisition was thought to be fruitless.
In 2002, Wall’s ice cream finaly saw profits in China, a good return to Unilever’s commitment.
Presently, local ice cream producers Monmilk and Yili are taking the market share several times larger than Wall’s. The performace of Wall’s in China is far from its performace in the world. According to Zeng Xiwen, the largest difficult for Wall’s to expand is how to enter into the markets of small cities.