Unilever is the world’s second biggest consumer products company after Nestle. It spends hundreds of billions of dollars a year around the world promoting its roster of brands like Lynx, Dove, Omo, Lipton and Ben and Jerry’s. Recently Warren Buffett and Kraft Heinz tried to buy the company for US$142 billion, but were told to go away in no uncertain terms. Unilever management then started a review of its sprawling business and late last week decided to sell off a host of brands, buy back shares and cut costs.
One area of cost cutting will have an impact on Australia’s advertising industry, including commercial television. Unilever CFO Graeme Pitkethly says the company will cut the number of ads it makes a year by 30% and slash the number of ad agencies it uses around the world by 50%.
Pitkethly says Unilever employs 3000 agencies around the world, which will be reduced “by half”. He says the company produces more ads than actually make it to air so the strategy going forward will be to show more of the better ads that make the cut for longer periods of time. Unilever has not revealed its planned savings, but it is estimated by US analysts that the company spends around US$7 billion a year on advertising (down from US$8.2 billion in 2011). If the 30% figure turns out to be the case, the company’s ad spending across the board will drop by more than US$2 billion.