issue 172 - June 1987
Today Unilever is one of the world's largest corporations, employing
300,000 people and spanning 75 countries - with pre-tax profits in
1986 of $1.8 billion. This is the story from its humble beginnings.
1. The self-starter
William Hesketh Lever, the son of a shop keeper, started selling 'Sunlight' soap to the workers in the 'dark Satanic mills' of the North of England in 1884. Five years later he was manufacturing soap at his own factory in 'Port Sunlight' near Liverpool.
Fewer than half Lever's employees and their families were housed in the so-called model village he built for them at Port Sunlight. The village relied on paternalism and other forms of control - and high rents.
By 1911 Lever Brothers was producing one third of the UK's soap. Lever's success was built by the exercise of power over his work-force, heavy brand advertising and a supply of cheap raw materials. Lever bought out competing firms and by 1890 had set up soap factories in Australia, Canada, the US, Germany and Switzerland. The First World War increased women's purchasing power in the UK and brought prosperity to the US, pushing up sales of Lux soap flakes. In the same period, Lever increased glycerine production for munitions and began to make margarine, using cheap oils kept out of Germany by the British naval blockade.
Early forms of margarine were made by two dairy firms, Van den Berghs and Jurgens, in the 1870s in the small town of Oss in the Netherlands. They used cheap fat imported from the expanding meal-packing industry in the US and sold their butter substitute to the working classes of Germany and the UK.
Animal fat prices were pushed up dramatically in 1910 by organisation amongst some meat packers as well as competition from other margarine makers and from soap manufacturers. Van den Berghs and Jurgens switched to vegetable oils: importing sesame from India and China, groundnuts from Senegal and cotton seed from the US.
The two Dutch firms succeeded because they grew fast early, maintained high levels of profit and could afford the latest technology as it developed. For most of the First World War Van den Berghs and Jurgens happily supplied both Germany and Britain and both bought Dutch soap companies.
Van den Berghs and Jurgens merged to create Margarine Unie in 1927. Attracted by the idea of having a prime market position in soap and margarine, Margarine Unie and Lever combined two years later. In Gas hundreds lost their jobs when production switched to Rotterdam and in Germany 2,800 salesmen were sacked as the new Unilever reduced the number of competing brands.
3. African conquest
In 1911 Lever obtained a right to use, within ten years, up to 750,000 hectares of palm-bearing land in Africa. He called his Congo base 'Leverville' and wrote of the African, 'He is a child and a willing child but he wants training and handling with patience.'
Lever Brothers soon needed vast amounts of edible oil and wanted to control their sources of supply. Levers quickly took over the Niger Company and the African and Eastern Trade Corporation. These two 'giants of Africa' were merged to form the United Africa Company (UAC) in 1929. The two Companies estimated exports in the four UK colonies of West Africa amounted to 60 per cent of palm oil, 60 per cent of groundnuts, 50 per cent of cocoa and 45 per cent of palm kernel.
In 1939 a UK Commission revealed that UAC and other traders were acting together to keep down prices paid to West African farmers. After the Second World War this practice continued. The farmers continued to receive low prices for their cash crops. UAC was able to diversify into textiles, beer, engineering and more profitable trading activities. UAC prospered as the rising West African elite realized that their interests were similar.
4. Fads, fancies and convenience
In 1922 Lever Brothers bought Macfisheries and the Wall's meat company to extend their product range. In the summer when demand for Wall's sausages was weak, the subsidiary began to make ice cream. 'Stop-me-and-buy-one' ice cream tricycles were introduced and later Wall's supplied refrigerators to retail shops.
The convenience foods market beckoned as the Second World War ended and as the West began to enjoy a consumer boom. Ice creams, frozen meals and oven-ready foods were developed. Now Unilever is developing its exotic products: out-of-season flowers and fruits. Unilever grows carnations in Kenya. The flowers are air-freighted to markets in Europe, to supply customers all the year round.
5. Nimble-fingers make fortunes
Unilever grows tea in East Africa, is a major buyer at all the tea auctions and is the market leader in most consuming countries. Yet in 1985 Brooke Bond's skilled tea pickers in South India were paid a basic wage of only 16 Rupees ($1.20) a day.
Unilever (through its companies Bushells and Liptons) has 62 per cent of the Australian market, 30 per cent of tea sales in Britain and Canada and 49 per cent of the US market. Unilever has 95 per cent of packet tea sales in India and Pakistan. It is able to buy cheaply in the Third World where costs are low and has invested heavily in processing to make things such as 'instant tea' which add value when retailed.
Unilever bought up Liptons UK in 1972. They already owned Liptons in Canada and the US. In 1984 Unilever made a successful £389 million ($618 million) takeover bid for Brooke Bond, another UK based tea company. The two purchases gave Unilever a dominant 35 per cent stake in the world black tea market.
Hidden from public eyes Unilever is developing global uniformity amongst its products. Factories are being shut in Europe as production is centralized into fewer, bigger units - vast factories and expensive machines can earn more than human workers.
Unilever is now spending increasing amounts of its annual budget on advertising in order to make its goods seem different from each other. The advertisements are designed to capture new types of buyers - slimmers one year, male shoppers another, the health-conscious the next. Advertisements are designed to whet jaded taste-buds and to convince consumers that Unilever products - not always better than local versions - are more desirable.
Changes in our diet introduced by Unilever could change health patterns. Making products competitive often requires more processing: using more preservatives, more colouring or increasing the refining. The effects on health cannot be measured. One certainly exists, however: the Company aims for, as one Unilever Chairman said, 'jam today.' Future generations will see whether we also have egg on our faces.
Written by John Tanner, a specialist in development issues.
1. Unilever's World, Anti Report No. 11, Counter Information Services, London 1974. The History of Unilever, by Charles Wilson, Cassell, London, 3 volumes, 1954 and 1968.
2. as 1.
3. as 1. Also How Europe Underdeveloped Africa Walter Rodney, Bogle-L'Ouverture. London 1972.
4. The Marketing & Processing of Tea, UNCTAD, 1984. Unilever's World, Op. cit. Nilgiri Estate Workers' Union, private letter to Jothn Tanner, 1985 .
5. Unilever's World (ibid). The History of Unilever, Unilever Annual Report, 1984 and 1985. Brooke Bond Annual Report, 1984.
6. Unilever in Africa 1984, SOMO, Amsterdam. Unilever Annual Report, 1985. Unilever Monitor Nos. I and 2, published by Transnational Information Centre, London.