11626: Unilever To Cut Out Fat.

Advertising Age reported Unilever plans to axe about 800 marketers and slash advertising agency fees, which won’t be a real beautiful move.

Unilever Plans To Cut 800 Marketers As It Slashes Agency Fees, Products

Weed: ‘We’ll Be Able to Remove Quite a Few Regional People’

By Jack Neff

If there was a single theme at Unilever’s investor seminar in London today it was cuts. The company will slash marketing headcount by 12% globally, or more than 800, mostly in regional operations such as the U.S. It’s also cutting the number of product varieties it sells by 30% and will continue to trim agency and commercial production fees, company executives said.

Unilever executives framed the moves as part of continuous cost savings of the sort that have been common since Paul Polman became CEO in 2009. But the talk of spending cuts, particularly in marketing, was more detailed than usual in this year’s investor presentation, which followed a quarter when Unilever disappointed investors with top-line growth that fell behind that of its biggest global rival Procter & Gamble Co. for the first time in years.

Unilever’s growth has slowed particularly in what had been its biggest competitive strength—developed markets—as economic growth there slowed and competition from the likes of P&G and L’Oreal, among others, increased.

Chief Financial Officer Jean-Marc Huet said Unilever expects to find more than $470 million in marketing savings this year, up from $260 million last year, in part from reductions in “non-working media,” or what the company spends on such things as agency fees and commercial production. It also expects to save by shifting more spending to digital, which now accounts for 15% of ad spending for the world’s No. 2 spender. That’s up from 14% last year and 12% in 2011.

Unilever also will reduce the number of stock-keeping units (SKUs), or sizes, flavors and varieties of products, 30% by the end of 2014, Mr. Huet said. It’s a huge cut for a company in an industry that has been trying to control SKU proliferation for decades, but also a risky one given industry trends favoring variety and smaller players with SKU-intensive product lineups that have been taking share from bigger players in the U.S. in recent years.

A Unilever spokeswoman in an e-mail declined to give details on precisely how, when or where the company will cut marketing jobs, but said it was safe to assume the 12% applies to a base of 7.000 global marketers referenced by Chief Marketing and Communications Officer Keith Weed in his presentation at the seminar.

“The marketing world has changed dramatically,” Mr. Weed said. “There’s an awful lot we can do to tailor our organization.”

Go direct

Part of that will be to allow global brand leaders to “go direct to big countries, rather than through regional hubs” and by using more global concepts and advertising, he said. “You can see in that organization we’ll be able to remove quite a few regional people.”

While Unilever has hiked advertising spending by $2.7 billion since 2009, Mr. Weed said it’s also saving money through lower-cost “earned” and digital media, or close targeting, such as only showing taxi ads near stores.

Some of Unilever’s biggest cost savings have come in so-called “non-working media,” or what it spends on such things as agency fees and production. Mr. Weed said non-working media outlays have shrunk from 32% of advertising and promotion spending in 2010 to 26% last year and an expected 24% this year. He said his ultimate goal is 20%.

Unilever spent $9.1 billion on advertising and promotion last year, which would suggest nearly $2.4 billion in agency and production costs. That compares to $8.2 billion in reported marketing spending for 2010 and $2.6 billion in agency and production costs.

The agency and production savings have come from doing fewer, bigger and higher-quality initiatives, Mr. Weed said, also pointing to the company having been recognized by Advertising Age as the advertiser with the most creative awards globally in the past year. Overall, the marketing spending per new initiative has risen 29% the past two years as the number of smaller projects has declined, Mr. Weed said.