Connected Four Growth (C4G), Unilever Indonesia’s Weapon in Tighter Consumer Goods Market Competition
Consumer Goods is becoming more competitive industry in recent years. It’s not only one-two big player in the market, but it’s getting more crowded with new entrants in several sectors in consumer goods industry. Aice threatening Walls’s existence in ice cream sector, Korean lifestyle disrupt consumer preference for personal care product, and local players challenge food product like Bango and Royco. The competition areas not just in product/brand level, but also the portofolio or even the sales/distribution channel. Everyone trying to win the market by strengthen value proposition of the product, evaluate the portofolio, and expand the new sales channel to online platforms. As one of big player in consumer goods industry, Unilever realized that they need to innovate and establish new strategy to make their domination still exist. The battle area is overheating, therefore Unilever preparing a ‘new weapon’, called Connected Four Growth (C4G) in 2016.
What is C4G? C4G is new way for Unilever to maintain their position as leader in Fast Moving Consumer Goods (FMCG) market and grow positively both in operational and financial indicator. C4G has four key components: 1) Mission, as on trend in innovation company and faster delivery; 2) Strategy, driving the core by penetration, high growth segments, and channel differentiation, evolving the portofolio, and developing channels; 3) Enabler is Net Revenue Management, Zero Based Budgeting, and Digital 2.0 4) to achieve new Vision to be faster, more agile, and stronger Unilever. C4G started to socialize in 2016, and it spread across the world including Unilever Indonesia as one of the biggest share contributors. The next question is, what’s the impact?
If we look at one of the key business performances (financial returns), it can be shown in several profitability and liquidity ratios as two critical indicators to measure the impact of C4G (2016-2018). Those are CCC (Cash Conversion Rate, in %) calculated by Net Cash Flow from Operation/Net Profit Attributable to Owners and Sales Growth. Sales growth in 2016 is 9.8% and 2017 is 2.9%. Sales performance is still positive. CCC rate 2016 is 105% and 2017 is 101%, indicated that they have enough cash flow to make investment/financing decision. CCC target of Unilever is 90%, so C4G has positive impact to their financial performance so far. There are three strategies component, each of them has distinct focus. Driving the core by penetration, high growth segments, and channel differentiation means indicating that Unilever trying to get growth from all product categories with different strategy proposition (grow premium product category, scalability in household level to get higher profitability, better ROIC for ice cream product). It emphasizes return from sales and invested capital which has important role aside of sales. Channels development is a critical move to maintain sales volume/shares through online channel as the most popular sales channel (E-Commerce) today. E-Commerce will be the new growth engine for sales. Portofolio Evaluation is corporate level strategy, how Unilever look their existing brand to maintain its strength and make best decision for its weakness, define the strategy for competitor as threat, and capture market trend as opportunity to grow. The example of portofolio evaluation is acquisition and divestment strategy.
In conclusion, C4G is an exceptional move from Unilever to maintain their dominance in FMCG market for both sales (revenue side) and liquidity (CCC) rate as the key to achieve sustainable growth.
References:
Unilever Indonesia Annual Report 2017
Unilever Investor Event Paul Polman (CEO), 2016
https://www.investorschronicle.co.uk/tips-ideas/2018/02/08/unilever-is-connected-for-growth/
https://en.ryte.com/wiki/Cash_Conversion_Rate
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I never heard before about C4G strategy by Unilever. Nice info mas aldo. If its worked out with Unilever, do you think that others FCMG company can implement that strategy too?