Ghosts from the Past and The Overseas Committee
Trade Synergies or Colonial Exploitation?
Decentralised Local Autonomy or Central Strategic Direction?
Continuous Successful Innovation or Commoditization?
History doesn’t repeat itself but it often rhymes.
The Unilever that we joined in the 1960s was a Big Multinational Corporation selling excitement to customers, ordinary Mums. Lord Leverhulme had a dream which always attracted flack from the less successful; The focus was on the Brands with a low corporate profile. The 1960s was the era of big government funding, surpluses were not wanted for investment, the creed was nationalisation ... Unilever kept its head down. This was 'the great inflation'. Those making the case for business identified Imperial Chemical Industries as a pinnacle of success, steeped in science and the proud producer of soda ash ... but Unilever made soap?
The attractions of Unilever for some graduates were the high profile Big Brands and the international diversity of opportunities in marketing, technology and geography; decentralised, exciting, full of diversity and flexibile local autonomy.
There were many clones in Unilever, but 'characters' did well and 'weidos' were shunned ... there were many ghosts from the past stalking the management training curricula.
William Lever (1851-1925) was an ambitious builder big brands. And to build big brands he needed -
a quality product and marketing nous which created excitement
propitious acquisitions which added new brands & scale
secure supplies which led overseas operations and the merger with the Dutch.
D'Arcy Cooper (1882-1941) was a friend and Chartered Accountant. And Billy Lever needed sound finance for everything -
secure supplies .
Overseas risks were high? But palm oil came from Africa ... why should anyone want to work in West Africa? The white man's grave? Risks were high but rewards were high ... if you learned ...
The Traders & Imperialism. Trade Synergies.
In the 1970s we met the ghosts who were reflections of The Niger Company, a company purchased by Lever in 1917. The deal was intended to secure supplies, but the aftermath bankrupted the company in a clash of cultures as the eye was taken off the ball ... every entrepreneur needed an accountant ... William Lever needed Francis D'Arcy Cooper ... just as Ludwig Mond needed John Brunner.
And it was uncanny, the more we studied the apparitions, the more we glimpsed history and The East India Company and the voyages of discovery ... we began to understand the rhymes and were determined to learn and not to repeat the mistakes ...
In 1879, the United African Company was founded following the merger of four
Companies trading on the River Niger led by the success of Miller
Brother & Company. Following the intense rivalry among the European nations
in the 1880s, The National African Company was floated to take over the
assets of The United African Company. In 1886 The Royal Niger Company
Limited was Chartered by British Government after the Berlin Conference and
the scramble for Africa.
PAX 'peace and order'
JUS 'actual law and legal rights'
ARS 'skill in trade and liberal arts'
In 1889, The African Association was incorporated by the merger of eight firms that were operating in the Oil Rivers area.
Following the revocation of the charter, Royal Niger Company changed its Company name to The Niger Company Limited in 1900.
In 1919, The Niger Company Limited was bought by Lever Brothers Limited. The same year, The Miller Brothers Limited and the African Association United to form the African & Eastern Trade Corporation.
In 1929 The United Africa Company was formed by the joint agreements of The African & Eastern Trade Corporation and the Niger Company (Owned by Lever Brothers Limited).
King & The Lion and Swanzy & The Unicorn were shippers & traders and opportunists who ventured along the African Coast in 1780s. They soon realised that slaves (like opium) were trouble but palm oil (like pepper) was sustainable gold ... for food, light & soap. The trading houses in Bristol & then Liverpool had learned their trade over the preceding century following the innovations of The East India Company who had sussed out how to finance trade from the synergies of trade. The Lion & The Unicorn were welcomed on the West Coast where there were mutual benefits to be had from trade; palm oil was plentiful in the rain forests and European goodies were minor miracles ... and the traders paid tax, comey & dash to keep the chiefs happy. As in the East the history books reported the bloodshed & violence. But the bloodshed & violence arose from the protection of trade from European competitors not from exploiting the locals. The rivals on the West Coast were the French and Mercantilism was their creed. The Lion & The Unicorn were trading not colonising.
The Lion started general trading in Bristol in 1695 but after the Napoleonic wars specialised in the African Trade and pushed Eastward to Cameroon using 'Manillas' as currency. The local Chiefs welcomed the traders, they came with goodies, and it was the chiefs who insisted that the palm oil quality was up to scratch and that all credit was repaid on time. In this way a lawful trust and money economy emerged. King and The Lion made most their riches largely from the tradition trade from hulks through middlemen to trusting chiefs, they were involved with the Germans in Duala and the French in Abidjan. Unfortunately by 1894 The Lion was musing that the increasing involvement of The British Government bureaucracy in trade settlements and in court disputes was unhelpful and they ceased trading with the 'colonial' powers. Although they were involved in The African Association they lack size and finance and in 1918 they sold out to Lever.
'The Company of Merchants Trading to Africa' had been formed as early as 1750 in an attempt to secure some protection for the slave trade from French violence & from local squabbles ... they funded a series of forts along the coast. The employment of surgeons also provided some protection from malaria.
In 1789 James Swanzy was a surgeon charged with the task of keeping slaves and slavers alive. The West Coast of Africa was the white man's grave.
In 1799, before abolition, Swanzy started trading on his own account in London and after abolition he ran his business from the old fort at Dixcove. The Unicorn joined the search for a replacement for the slave trade; cotton, coffee, pepper, hemp, wheat ... there was no shortage of opportunities but nothing really worked as well as palm oil. The heavy hand of the British Government became increasingly involved. By 1880 the scramble for African colonisation started and trading took a back seat. The Unicorn suffered as the British Government imposed taxes but failed to provide protection. The Ashanti were at war with the British but thanks to the mutual benefits of trade The Unicorn traders were still on convivial terms.
The Unicorn was involved sadly in gold on the Gold Coast but they sold out to Millers.
The Unicorn was also involved with tobacco products in Freetown and sold out to Patterson Zochonis (a business still being run by Frank Sawyer in Malawi in 1976!).
Swanzy missed their opportunities and were absorbed by the successful Millers.
From 1830 Forster & Smith were in the Gambia and into groundnuts from Brazil, and they were into trading finance in London and currency in Bathurst. The ebbs & flows of the seasonal nature of the agricultural crops which were replacing the slave trade presented a problem which required a trusted system of credit and hedging. The link between trade and finance was important & tricky. Foster & Smith were pioneers. France remained the big competitor on the coast and the biggest market for groundnuts. By 1863 The Unicorn had eclipsed Forster & Smith's expansion down the coast and Goddard took over the Gambia business and in turn The Bathurst Trading Company was purchased by Lever in 1917, the principle shareholder at that time was James Finlay from the East Indies.
Competition was intense, amalgamations were in the air and, of course, so were bankruptcies.
The Liverpool Houses were into the Niger Delta and slaves and palm oil. As the Bristol port silted up and the Bristol privateers ended up on the losing side in the Seven Years War, it was Liverpool that emerged as the gateway to the industrial revolution and 'legitimate' trade with West Africa became riskless profit. Way after abolition in 1807 the slavers continued their trade in cahoots with the chiefdoms and fought against the Royal Navy. But it was palm oil that just grew and grew. Initially the Liverpool slavers and oilers traded through middlemen and stayed on their modified 'depot' ships, which later became 'hulks' before finally onshore factories were established in the 1880s. The Niger was navigable by from 1830 and with steam ships from 1850.
Thomas Harrison & Company came late to the party, they started in Liverpool in 1837 and established a trading foothold by offering better terms & prices for palm oil; it never paid to be greedy and of course all the locals loved it. But the interloper's oil was 'chopped' by the established traders and resentment boiled over. Harrison moved to the Benin River, there were plenty of opportunities now the slavers had been squeezed. Harrison went on to form The African Association in 1889, an amalgamation of trader firms of the Oil Rivers. King & The Lion were there and John Holt & Harry Cotterell and Hatton and Cookson; they had offices in The Royal Liver Building. They invaded the markets of the interior but they were up against the Millers & the Royal Niger Company and failed to get a Charter. The days of the African middlemen was not over. The African Association was shut out; restraint of trade?
There was no shortage of Liverpool competition, James Hatton & Son, later Hatton & Cookson, started to specialise in the palm oil trade from 1845, largely to the east & south in Gabon & Congo. The scramble for Africa upset Hatton & Cookson more than most as they found themselves operating in 'spheres of interest' of all the 'colonising' powers except the British ... Germany, France, Spanish, Portuguese ... by 1919 Hatton & Cookson had amalgamated into The African & Eastern Trade Corporation.
G B Ollivant was a Manchester trader who started export shipping to West Africa from 1858 in partnership with Elder Dempster; Freetown, Lagos, Kano, Lomé. The Golbourne Cotton Mill was part of their empire in 1900 and vertical integration a part of business strategy.
Gottschalck another Manchester trader who always seemed to do well on the coast. 1896/97 in Cotonou and Lagos. Textiles and hardware from Britain. No produce and no goodies.
The Millers from Glasgow started trading on the Niger even later in 1868 and were inevitable adversaries of the Harrisons from Liverpool. The Miller support of Ja Ja, a local king, against the struggling law enforcers proved fortuitous; the locals loved the Millers and their trade waxed throughout Southern Nigeria and forced the amalgamation of the competitor traders into The African Association rivaling the Millers. The Miller success up the Niger led via The United African Company to The Royal Niger Company as founder member. The Millers seized their opportunities. They could have bankrupted Swanzy or taken them over? Would the liquidation of stocks destroy the profitability of the market? Or were there synergies of scale? How much was the brand and loyalty worth? In 1919 Swanzy and Millers became part of The African & Eastern together with The African Association Companies. Included in African & Eastern deal was the Woodin Company, a private trading venture operated by W A Woodin, an Elder Dempster purser. Woodin had recently been acquired by the Millers and was significant as they brought into party, rubber, cocoa & wood estates. In 1920 Miller/Swanzy also opened a retail store in Accra; Kingsway Stores. In 1920 Millers were also into motor vehicle importation.
Scramble for Africa. Colonial Exploitation.
In 1841 The Admiralty explored the Niger but it was malaria rather than warfare that did the killing. Nevertheless by 1849 there was some 'official' protection for traders from the British Government at Fernando Po ... and quinine for malaria.
But there was interest group violence everywhere and the British Navy and the local Chiefs and tribal kingdoms were out of their depth. Lawful trade became difficult on the West Coast, too many interest groups wanted a share of the spoils ... and trade became suffocated in tax, comey & dash. Trade was 'completely apolitical'. But what a mess resulted from interest group politics ... a precursor of the Groundnut Scheme?
The Niger delta was central to palm oil and to the trading chronology which was traditionally seaboard based and moved from 'depot' ship, to hulks to shore factories. It was only when the inland expeditions up the rivers opened up trade with the Moslem North (groundnuts, cotton, shea nuts, tin) that there were threats to the indigenous middle men and the first signs of native hostility. There we hulks at Onitsha in 1871 manned by indigenes but resented by the coastal indigenes who were threatened. Things were getting messy. There were still mutual benefits of trade but the parasites & predators appeared like bees round a honey pot. Of course the traditional traders were also resentful of the upstarts who ventured inland with steamers. Competition was fierce. Deals, agreements, contrived arrangements, amalgamations and carve ups were the answer.
'The pros and cons of inter-company agreements have been have been much debated. Their basic purpose was to increase the profits of the participants: but commerce was not a zero sum game in which anything won is subtracted from a pre-existing value. Commerce creates value which would otherwise not exist. Such created value is normally divisible between the two parties to a transaction'.
In 1869 Holland Jacques, a small firm from Lagos, tried their hand on the Niger but they lost a steamer in 1871 from a hostile attack and this catapulted Lt Colonel George Goldie Taubman into the fray. George Goldie was persuasive and in 1879 with The West African Company (also from Lagos), The United Africa Company (Millers & the British firms) was established. But the French persisted. Inevitably the territorial ambitions of nation states politicised 'the scramble for Africa' into 'spheres of influence' and dubious & unsavory agreements between national associations and local kingdoms. Honest trading trust built up so painstakingly over the years took a back seat to the 'fixing' of tax & land grabs. In 1882 The National African Company took over and refinanced The United African Company. In a major coup the French agreed to get on board. But the company strategy was to rely on the 'colonial authorities' to help to seal the contracts with the kingdoms. Taxes and comey predictably increased and customers & suppliers were short changed. Was this a 'protection racket'? Taubman led an attempt to legalise the exclusive contracts on the Niger, and eventually The Royal Niger Company obtained a Royal Charter in 1886. Action spurred on by formal German Colonies in Cameroon & Togoland, and a threat to sell out to the French, the lower Niger was effectively a British Protectorate. An ignominious fix. Did trade become incidental to the administrative bureaucracy? The Charter monopoly was a farce. Competition from The African Association and the coastal traders was significant. And the French were back from the North. The locals were restless and believe it or not slavers were back. The administrative bureaucracy was expensive amongst the culture clashes & fiefdoms and tariffs & taxes onerous. Government interference increased. In 1900 the company was in trouble, and a British Protectorate was established. The Royal Niger Company gave up their Empire but retained their Liberty and The Niger Company was born.
Although The Niger Company paid dearly for the 'protectorate' independent traders 'coalesced' and there was a reluctance to risk open trade competition with the local middle men. The warm embrace of the British Government had extinguished enterprise, the Niger Company jogged along and it 1919 they were bought out by a enterprising competitor, Lever Brothers.
In 1893 the struggling African Association had sold their properties to the Royal Niger Company and eventually in 1899 Millers were associated and trade improved. After the war in 1919, as Lever flexed his considerable muscles, The African & Eastern Trade Corporation Ltd was formed with the Millers but without the Niger Company who solved their problems by selling to Lever in 1919. Ambitions to expand to the East involved G & A Baker in Turkey, then Kenya & Tanganyika and Gaily & Roberts. The company also included Hatton & Cookson and a variety of other businesses, several in Britain ... but nothing held off the Lever onslaught. 'It was always a characteristic of the merchant companies in West Africa that they were anxious to engage in every activity which held out an opportunity for profit'. The African & Eastern were involved in a sprawling, uncoordinated mess without focus. When the crash came not even the batik designs from the Dutch Wax Blocks could save the day.
In 1929 African & Eastern became a main constituent of UAC with The Niger Company, owned by Lever.
William Lever had enterprise in abundance and his plans required secure supplies of palm oil for soap making and particularly lauric oil found in palm kernals which bestowed the miracle of lather and quality to Sunlight Soap.
Lever had tried coconut oil processing in the South Seas to secure valuable lauric oil. But the Lever activity on the West Coat was breathtaking. The company invested and thrived in palm oil and rapidly overtook The African Association, Millers and The Niger Company. Nothing other than palm oil was dramatically successful. Lever created a palm oil industry of private enterprise with modern scientific techniques and global markets for sustainable produce. 'Thriving local communities involved churches, schools, hospitals, raods, shops, cinemas, bathing pools, sports facilities and infrastructures for the local production of foodstuffs'.
In 1910 he purchased MacIvor a Liverpool merchant trading in Nigeria. Nut cracking became a lucrative social activity in the villages and Lever dabbled unsuccessfully in oil mills. In 1910 West African Oils were milling kernals. In 1910 CPKN with concessions in French Equatorial Africa. In 1912 Peter Radcliff, Freetown. In 1912 The Calla River Company, Liberia. In 1917 John Walkden and The Bathhurst Trading Company was purchased (ground nut oil was required for Lever latest venture in Europe; margarine). During the war Lever got into shipping as Elder Dempster failed to cope. In 1918 King & The Lion was purchased.
Early in the century Lever tried and failed to get land in Nigeria for the sustainable production of palm oil. A trick was missed but in 1911 a large concession from the Belgium Government was secured for palm oil and palm kernal oil plantations and mill in the Congo. A gigantic task. Wow; one enterprise after another at breakneck speed. Then in 1919 the big one The Niger Company. There was no due diligence and no caveat emptor, Lever was ambitious and in trouble with the banks (the shareholders stumped up) but it took the nous of D'Arcy Cooper to rescue Lever from the banks.
The new Niger Company enjoyed local independence, reliable managers were paid well and if they remitted their profits few questions were asked. Soap manufactories were set up in Kinshasa in 1923 and Apapa in 1924.
'In the final balance, Lever's instincts and hunches must have been more often right than wrong, for the group he brought together survived and became the strongest commercial organisation in Africa'. But perhaps it was not instincts & hunches but rather a determination to experiment and chase profits and cut losses ...?
In 1929 when the Niger Company merged 50/50 with The African & Eastern Trade Corporation into UAC, the resultant company operated in over 1000 places in Africa and in several other parts of the world. They had 60% of the palm oil trade 45% of the palm kernal oil trade, 60% of groundnuts and 50% of cocoa.
Disaster and reconstruction followed but crucially the financial clout for the rescue lay with Lever. In 1939 UAC became a wholly owned subsidiary of Unilever. But by 1939 Unilever's supplies were guaranteed on global commodity markets an the Far East had overtaken West Africa as sources for vegetable oils. UAC was an anachronism?
Trade Synergies or Colonial Exploitation?
Was UAC a typical old colonial trading company? Sir Frederick Pedler -
'traders generally were not favorably disposed towards colonial governments. They regarded them as expensive and interfering'.
The rhyme of history could be sensed from the Niger in the 1880s as the mutual gains from trade in sustainable palm oil were compromised by violent squabbling over shares of the spoils.
Some fickle folk tended to avoid the hard work, honesty & thrift involved in growing the size of the cake and too often fell into temptation and tried for a larger share of a smaller cake.
There was always a plausible suspicion of middlemen who took their cut and 'simply' passed on existing value, they had done nothing to 'deserve' the gains from trade which should be confiscated by legitimate even democratic governments.
But too little recognition was given to the risks, the costs and the services provided. The competitive supply chain was in everyone's interest, synergies were involved.
Lever was a breath of fresh air on the West Coast. But Lever was also sceptical of middlemen however, he wanted manufacturers to have direct contact with customers and suppliers ... and he wanted scale. But the truth was that middlemen evolved as specialists who possessed indispensible know how.
As the amalgamations continued and the Brits enjoyed two advantages -
English was more often the lingua franca on the coast and
the City of London was adept at the provision of capital for trade.
In 1923 Lever had an altercation with the colonial administration. Lever was adamant -
'The colonial system of administration was founded on the recognition of the principles that the encouragement of trade and commerce and the development of the colonies were of first consideration'.
The governor at the time Sir Hugh Clifford responded and missed the point -
'This was the most monstrous and mischievous heresy. These so called principles died finally and for ever when Warren Hastings was impeached; we adhere to the principle of the paramountcy of African interests'.
The colonial administrators didn't get it. Lever believed that 'the encouragement of trade and commerce and the development of the colonies were of the first consideration' and yes he did 'adhere to the principle of the paramountcy of African interests'. There was no conflict of interest. This was synergy. Wealth creation for everybody.
A telling incident had occurred in 1900 when Miller had approached Sir Ralph Moor, The High Commissioner for Southern Nigeria, on the subject of interesting the Africans in the cultivation of rubber plantations at Miller's expense. He asked for land and made it clear that his object would benefit the people. Authority replied with a emphatic 'no, the policy was to maintain the communal ownership of the land' and 'Development' was the official policy ... not trade!
The production of sustainable palm oil was delayed and the 'tragedy of the commons' continued.
It was as if nobody had read and understood Adam the Smith of 1759 and 1776? Trade was mutually beneficial.
The precedent had been set with the experience of The East India Company in India over 100 years before. In 1787 Warren Hastings (1732-1818) of The East India Company and The Governor General of Bengal was the first Governor-General of India from 1773 to 1785. He joined The East India Company in 1750 as a clerk and through hard effort & diligence he learned and worked his way up. The British Traders still dealt directly with the local leaders who squabbled amongst themselves for a share of the action. Keeping the activity safe for trade was impossible without becoming involved in Indian politics and taking 'sides' in an ignominious zero sum game. Hastings and the Company became more & more involved as 'umpires' and intermediaries in local squabbles. He was a natural choice to manage the coming together of the three British Presidencies; Madras, Bombay and Calcutta. Peace & tranquility fostered trade and the parasites & predators, bandits & thieves were targeted. What a mess? Pitt's India Act of 1784 gave the British government effective control of the private company ... and the thieves were everywhere feeding on the gains from trade; inside the Company bureaucracy and outside in the political quagmire.
Hastings retired after 10 years service and was impeached for mismanagement and corruption. He was a scapegoat, Pitt and Burke had to be seen to be doing something. Moral backsliding was the temptation for potential parasites & predators.
Mercantilist folk so often found it difficult to grasp that there were mutual advantages of trade, synergies were involved. There was no conflict of interest East India Company trading was in the interests of everybody both the Company and Bengal.
After almost 10 years of trying Warren Hastings was acquitted; there was no case to answer.
Mutual benefits accrued from trade, for sure, ... trust, peace & tranquility were needed ... and strangers could trade the Ibo's shilling was the same as the Yoruba's shilling. And there was a Hausa saying -
'Trade without profit is madness'.
In 1925 the new Niger Company made its first profit under Managing Director Snelling, a whiz kid of immense intellect and the operator of a Hollerith punch card machine -
'To win profits it was necessary to specialise'.
The Overseas Committee was on the ball and focused on key folk & income streams or in the parlance of the 'concern', 'Listers' & 'Remittances' ... and it was management at the coal face which produced the surpluses which were continuously nourished by acquisitions of innovative brand excitements which were then 'Unileverised' ... and fed off the existing successes.
The OSC learned the lessons from the ghosts of the past -
innovative traders in sustainable palm oil secured mutual benefits; income for native buyers & sellers and, back home, secured sales of manufactures and supplies of food, light & soap as Sir Frederick Pedlar explained ...
political shenanigans of 'the powers that be' were an inevitable, painful & most important an added cost of doing business as David Fieldhouse explained ...
failure of grandiose schemes like the groundnut affair ... a toaster was a toaster ... commoditization of low margin diversified businesses became the dismal European norm ...
The OSC went with the flow and focused on trade synergies and discovered there was an amazing international excitement for innovative European brands. Overseas there were prospects if only host governments allowed; as reliable corporate citizens with integrity, Unilever didn't dash and joined the Trade Associations ... there was profit in geographical spread and a low profile.
Product marketing and production in factories throughout the world presented problems of a similar genre; they were ‘management’ problems to be solved. Product innovations, brand acquisitions, R&D and production technology were universal core competences. But execution was a matter for local autonomy.
But was product innovation and R&D a bottomless pit of expense or an overflowing well of invention? The coalface needed brand excellence not snake oil.
Did Unilever's history of growth indicate brand acquisitions delivered more than R&D?
There were failed acquisitions of the 1960s when diversifications were less than propitious, some suggested they were to provide sinecures for redundant African traders? The coalface needed focus; brand innovations in FMCG not diversifications and more fiefdoms.
In 2005 Geoffrey Jones had outlined a problem -
‘In UACs case it would appear that a strong motive for the firm’s diversification was to provide continued employment for existing staff. Although there were other reasons for UACs diversification strategies and other factors in its ultimate failure, the assumption that its managers possessed skills that were easily transferrable from Africa to running businesses in Europe and elsewhere turned out to be thoroughly misconceived. UAC was radically different culture'.
Nigeria was a special case during the oil boom of the 1970, Lever Brothers & The United Africa Company became extraordinarily profitable but UAC were recycling oil dollars, brilliant opportunists but they had not stumbled across a new business strategy of successful diversification. The UAC diversification strategy eventually failed. Lever Brothers Nigeria Ltd was successful in exploiting locally the excitement of the globalisation of innovative FMCG.
But in Europe the great production technologies of the past become obsolete skills; fitting on nigres, fat blending, hydrogenation, sulphonation, oil refining, tissue culture & more? They become old hat and less relevant to brand success? And margarine had a tough time overseas where ever bread was not a staple? P&G were enormously successful in detergents in North America and then Europe with central strategies from Cincinnati. Technical innovations were pumped up into brand strengths, premium prices & economies of scale. But the commoditization relentlessly undermined the business strategy which began to reek of centralised sclerosis ... a toaster was a toaster ... P&G's central strengths became a handicap overseas?
Later in 2008, as usual, MJC hit the nail on the head and summed it all up when he recalled an empty office with black coffee or more likely the club and a convivial pint -
'We were in 'business' not 'industry', we would spend hours putting everything on the table and looking at it from every angle, every which way, honing and revising our plans and then we just agreed on an option and got on with it'.
'We never knew how to make money out of bits of 'miscellaneous products' when the accountants shared out Unilever's enormous 'indirects'. The European & North American problem was that we did not innovate fast enough in all product groups to avoid mature markets going ex growth and meanwhile overseas emerging markets were burgeoning and required serious investment. Invest in 'nothing but the best', nobody told me to compromise'.
'Unilever's growth and innovative success always tended to come from propitious acquisitions rather than Research Division, the purveyors of snake oil ... and even our track record on acquisitions was mixed'.
'There was no effective R&D to speak of. The product had become a commodity. Anyone could set up a factory and buy the know-how to formulate just as cheaply as us. Raw Materials were bought at common international market prices by everyone. We struggled for market leadership with 3 'national' competitors and myriad of local operators, selling their DOBs at rock bottom prices. What they lost to us in scale they more than gained through lower overheads.
You must have come across this type of situation in your studies; I came across it frequently at Harvard, and we never developed a realistic solution.
There were of course the snake-oil men in research who promised all sorts of miracles including using URL expertise to improve our buying decisions. But buying raw materials is like buying stocks and shares; no matter how good your intelligence, there are very few who beat the market, and they are the first to admit it's just luck. The sensible ones make their fortune and quit before they lose it'!
... and above all, what about Adam the Smith and his law of unintended consequences?
The management ethos within the Overseas Club in the 1970s had some merit -
care over the appointment of senior managers - hard work & honesty
delegation within agreed 'annual estimates' and 'five year plans' - focus on the knitting
prior agreement for all capital expenditure - thrift & long term sustainable investment
... and no restrictions on convivial pints!
It was argued that the misreading of diversification & focus, both delayed the solution to the European profitability problem and delayed globalisation?
When we retired in 1994 the Unilever culture of decentralised local autonomy was strong & persistent and grew within the context of the strategic focus on Big Brands. And for sure the centre of gravity was no longer Port Sunlight & Rotterdam, nor a rationalised frustratingly inward looking Europe but clearly Unilever had been reestablished as an outward embracing global entity ... focused on long term, integrity and doing Big Brands in emerging markets by investing in operational excellence and local autonomy.
Unileverised, globalized and indigenised managers, were all paid up members of a social marketing club, they were no longer sprinkling the desert with a teaspoon but focused ... Unilever culture involved shared global goals that were relevant.
It was easy to say ... but execution was another matter ...
Some argued that it took an Irishman as a Core Strategist, a Frenchman as a single CEO, and a stranger from Nestlé as a new COE to pacify the fighting fiefdoms?
Way back we had summarised the business strategy overseas in the 1970 over convivial pints with Ronnie Archer, Derek Holdsworth and Mike Cowan ... every word significant ... and familiar -
close to aspiring customers discovered and trusted through decentralised local marketing opportunities
profitable projects which created long term sustainable income streams for further investment
focused on strategic core competences in global big brands 400 FMCG
operational excellence which chased profits and cut losses
continuous innovation from inspired brand acquisitions and business driven R&D
a social club which cemented & glued in place an ancient culture which had recruited, developed and retained nothing but the best beer drinkers ... such was Unilever's most important competitive advantage ... it was beer which secured scale and financial clout?
The FT in 2016 described Unilever’s culture as intensely 'collegial' -
'collective responsibility shared by each of a group of colleagues, with minimal supervision from above. Marked by camaraderie; good will among colleagues; friendly and respectful'.
Execution was a cultural problem, as many European managers who were seconded overseas discovered to their cost, nevertheless some able young men were given the inestimable advantage of learning the hard way ... while others were given enough rope to hang themselves ...
overseas, willing & ambitious players required reliable tools
in Europe, we felt rather like the Iron Duke -
‘the strategy was clear and I gave the orders but they said they wanted to discuss it’.
The need for global agreement meant it was hard for Unilever to move quickly ... but shared cultural values and strong social networks kept Unilever together and 'the spirit of this mission forms a thread that runs throughout our history'.
Unilever never worked to a macho grand plan. Of course there were mission statements, strategic reviews, 5 year plans, annual estimates and ever more detailed specifications and all the trappings of admirable intent but reality was 'a much messier evolution of trial & error'.
As the history of Unilever unfolded the process involved was described by Floris Maljers in the HBR in 1992 -
Unilever evolved through a Darwinian system of retaining what was useful and rejecting what no longer worked as the business responded to the local market place. Unilever was not made by the application of theory but through a much messier evolution of trial and error.
Individual Unilever managers around the world were 'Unileverised' and shared a common vision & understanding, a common culture.
The company 'ization' policy created a decentralised organisation of self sufficient subsidiaries which led to the isolation of many of Unilever's operating companies during World War II and an increased number of local competitors.
Managers were trained through on the job experience through an extensive system of attachments and courses at Four Acres. Major conferences were another important element in creating and maintaining Unilever's large network of managers. At these conferences, over good food and drink, senior people meet, exchange views, and reconfirm old friendships. They know whom to call in case of need and what to expect. When managers returned home, they were still part of the Unilever network. Unilever always looked for people who worked in teams and understood the value of cooperation.
Unilever was really a management education institute financed by soap and margarine!
Ken Durham concurred, Read Ken Durham and Unilever as a 'Multi-Local Multinational. Harvard Business School Case 808-025, August 2007. (Revised February 2016).
In 2015 the Unilever Website described Unilever's corporate vision – helping people to look good, feel good and get more out of life – the words indicated how the business understood 2 billion consumers and their lives. Consumer Research and Innovative Marketing & Science in hygiene, nutrition, empowerment and environmental awareness. Focused on making habits; easy, desirable, rewarding & understood. In personal care, home care, food, refreshment, and emerging markets. Sustainability; the doubling of growth decoupled by halving environmental impact. In partnership with NGOs - Oxfam, PSI, Save the Children, UNICEF, World Food Programme. People & profitable volume growth, Brands & innovation & marketing, Operations & efficiency. Growing shareholder value to fund growth and investment.
Lots of words, but plus ça change, plus c'est la même chose ...
2015 Swedish Chairman & international Leadership Executive -
Polman - CEO - Dutch, Nestle, P&G.
Pitkethly - Finance, PwC.
Baillie - HR, South Africa.
Blanchard - R&D, Salford.
Havelock - Refreshment, Cambridge.
Jope - Personal Care, Edinburgh, Singapore.
Kruythoff - North America, Brazil, South Africa, Bestfoods.
Paranjpe - Home Care, Hindustan Lever.
Sourry - Foods, Cambridge.
Sotamaa - Legal, Finland.
Weed - Marketing, Elida Gibbs.
Zijderveld - Europe, Brand Manager, Rotterdam.
Engel - Supply Chain, Oss.
The ghosts from the past reminded us that Governments weren't good at grandiose schemes ... but Unilever had a chance with big brands when they focused on local scale up of their chosen specialisations ...
john p birchall
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