In my ‘fireside chat’ with Unilever’s new CEO Fernando Fernandez this month, there were three standout points: his laser-focus on demand generation and premiumisation; his ambition to drive “desirability at scale”; and a major pivot in its marketing approach. His comments on marketing particularly caught the attention of fmcg peers, marketeers, and influencers alike.
Consumers are increasingly suspicious of brand messages from companies, Fernandez said, and younger shoppers are increasingly making brand purchases because of trusted influencers, celebrities, and TikTokers. In fact, research shows 56% of Gen Z consumers make brand purchases after recommendations from influencers.
As such, Unilever is moving to a ‘social first’ marketing strategy, and is creating a marketing system that involves getting others to advocate for its brands and convey their messages at scale. Unilever’s aim is to increase social media from 30% of its marketing mix to 50% in time. This is significant given Unilever is one of the biggest fmcg advertisers in the world, spending €9.4bn on brand and marketing in 2024 – an increase of €1bn on 2023.
Lessons from L’Oréal
Fernandez’s aim is to create a machine of content creation, which will entail multiplying its content creation 20 times. That will be enabled by AI technology as well as hiring 20 times more influencers. There are 19,000 zip codes in India and 5,746 municipalities in Brazil, and he wants at least one influencer in each. Fernandez believes returns are higher in social media marketing than any other alternative allocation of marketing funds.
It seems to us Unilever is moving towards the model of L’Oréal, which is a leader in social-first marketing. It has a 14% global market share in cosmetics, but a 23% share of paid voice and 30% share of influencer voice.
The company has a 1.5 times index in share of voice and historically has grown around 1.5 times faster than the global cosmetics markets, although that has slowed recently. L’Oréal’s strategy is to outspend peers by a substantial margin and close the gap between its share of the global cosmetics market and its share of voice. It works with more than 50,000 influencers worldwide.
There are lessons from L’Oréal in how Unilever engages with consumers. It must work across all engagement touchpoints: paid, advocated, and owned.
In L’Oréal’s case, it is optimising its marketing spend mixes with an AI tool called BetIQ, which is yielding significant productivity improvements of 10%-15%. It is already present in six of its key markets with two more planned this year. The tool covers 60% of its advertising spend and is really helping its marketeers optimise spend and returns. As the AI learns and gets smarter, returns are only likely to increase.
However, there are big differences in the financials of L’Oréal and Unilever. L’Oréal’s gross margin is 74%, while Unilever’s is 45%. Meanwhile, L’Oréal’s advertising spend as a percentage of sales is more than 30% – that’s double Unilever’s spend of 15.5%.
Unilever will need to increase its gross margin significantly and continue to evolve its portfolio more towards beauty to get to a similar point. Separating its ice cream unit is a big step on its journey, as is its ambition to increase the weight of premium brands in its portfolio from 35% today to 50% in time.
Dove is an example of where Unilever’s premiumisation strategy is most visible. It is Unilever’s largest brand: worth €7bn and accounting for more than 11% of sales. Dove has been growing 10% in recent quarters – helped by its premium Dove Advanced Care range, its entry into serums, and most recently the launch of Dove whole-body deodorants.
Right influencer, right brand
However, there is a big debate as to whether this bold vision is the right approach for Unilever at the right time. Is Unilever just playing catch-up, or making a bold attempt to get ahead of the consumer and play where the consumer is spending more time?
Clearly, Unilever needs a balanced approach to its media marketing mix, we see the goal to attribute 50% of its weight to social media as more a direction of travel and a signal of intent.
More important will be matching the right influencer with the right brand. Understanding influencer output and consumer reaction will be crucial, and to generate buzz and scale sustainably, there are more nuances than ever before. For example, getting Usain Bolt to partner with Unilever’s recent Wonderwash laundry brand launch makes sense, given the brand message is all about speed (a 15-minute wash cycle).
What we find most interesting is Unilever’s thinking around a hyper-targeted approach to micro-influencers, especially in emerging markets. Unilever will need to think carefully about which influencers align best to its values, as well as topics around brand safety and the balance of short-term versus long-term returns.
Ultimately, boosting long-term brand equity is key, and building more trust with less waste will be crucial, so the devil will be in the detail.
Risk versus reward
Yes, there are risks in Unilever’s approach to marketing. But sticking to the status quo also carries risks given how fast consumer trends are moving. There have never been more smaller ‘ankle-biter’ digital native brands around, which means cutting through and staying visible is getting harder. Legacy brands that don’t adapt to the new reality will quickly lose relevance.
The pace of change in geopolitics and consumer trends requires clarity and precision of strategy, coupled with a bold vision to get ahead of the consumer. CEOs are being replaced at a record rate in fmcg, and a big reason is their not being sufficiently consumer-centric.
Simply tweaking what you did last year isn’t enough, and playing catch-up is less effective than it was. Unilever has set out its stall and peers will be watching closely. The question is not whether they will follow, but how fast.
Warren Ackerman is the head of European consumer staples research at Barclays
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