Unilever’s marketers could be forced to adjust budgets from scratch every year as part of a wider cost-control measures to offset the impact of slowdown in emerging markets.
Chief executive Paul Polman said the Marmite maker will roll out a “global zero-based budgeting programme that will look to foster a culture of tighter cost management.
Executives will be hoping the move ensures its brands carry some of the momentum they gained toward the end of 2015 over the next 12 months, prioritising revenue growth to profit margins. Revenue was up 4.9 per cent in the three months to December, spurred by growth in home care and ice cream, both of which have already introduced stricter cost control measures.
Zero-based budgeting is a tool Unilever has used previously and has more recently been adopted by companies like Mondelez and Coca-Cola in an attempt to protect margins amid tougher growth prospects. When Unilever did this previously, cost containment was hampered by a sprawling corporate structure spread across seven operating divisions, but it is now streamlined into four divisions and the business will be hopeful of making gains quicker.
Despite the clampdown on how it spends, Unilever assured that it will continue to invest in its brands, particularly via digital, which accounts for between 25 and 35 per cent of its total marketing outlay. It also backed innovation to help drive the business this year from its investments in developing healthier alternatives, as well as the tech for its homecare products.
“We are preparing ourselves for tougher market conditions and high volatility in 2016, as world events in recent weeks have highlighted,” said Polman.
“Therefore it is vital that we drive agility and cost discipline across our business. We are further strengthening our innovation funnel while shortening innovation cycle times, stepping up our digital capabilities and rolling out a global zero based budgeting programme. Our priorities continue to be volume-driven growth ahead of our markets, steady improvement in core operating margin and strong cash flow."
The macroeconomic challenges 2016 poses could slow Unilever’s attempts to move its product line upmarket.