Once upon a time, a Unilever product was a must have in a home. However, their products are slowly disappearing thanks to emerging local brands like Nomi, Movit and Samona.
Unilever has been operating in Uganda for over 20 years and offers products ranging from nutritional foods to indulgent ice creams, affordable soaps, luxurious shampoos and everyday household care products. They produce brands including Omo, CloseUp toothpaste, Sunshine, Vaseline, Dove, Blue Band and Royco Mchuzi mix.
Your money, not your skills
Unilever Uganda imports their products from Unilever Kenya where products are manufactured. To Unilever, Uganda is just a dumping country where no manufacturing plant exists for the multinational as all manufacturing is done in Kenya depriving Ugandans of skills and knowledge that arise when a global brand sets a manufacturing plant locally.
Uganda continues to suffer with unemployment while allowing products to cross the border through a process called transfer pricing. Transfer pricing — one of the biggest tax rip offs of the recent past — has become a flashpoint as governments came to realize how large multinationals shift costs between items and avoid paying huge amounts of corporate tax within their borders. Kenya and Uganda issued a transfer pricing regulations in 2006 and 2011 respectively. The guidelines set out recommended stiff penalties for taxpayers who fail to comply with the arm’s length principle of transfer pricing, which states that the amount charged by one related party to another for a given product must be the same as if the parties were not related.
In Kenya, Unilever has been growing tea since 1924. The estate in Kericho covers over 8,700 hectares and is Rainforest Alliance certified. There are 12,000 permanent workers and 4,000- 5,000 seasonal workers.
Unilever Uganda was ranked 74th on the list of the top 100 taxpayers in Uganda that was released by President Museveni in February 2016. Unilever had a total tax contribution of Ugx. 7,357,013,593. Unilever was well beaten by its local competitor Movit Products Limited which clocked in at 54th with Ugx. 10,148,106,107. Does the multi-national really have such a low turnover that it remits such low taxes to the extent that local companies are beating it?
Omo, which was once a household detergent enjoying a monopoly with 100% market share in the country was relegated to 2nd place when Nomi a Mukwano brand and Ariel stepped up to conquer its throne. This was mainly caused by complacency by Omo’s marketing who failed to deal with the emergence of these new brands. After the initial battle had been lost, Omo instead of revising its marketing and distribution strategy decided to opt for a new product Sunlight detergent powder to compete with Nomi which they assumed was lower competition. Sunlight was to be sold at a substantially lower price that they assumed the lower income earners could handle. This however badly backfired as Sunlight instead took up arms against their own and is now fiercely competing with Omo. Nomi’s only competition currently is Ariel with Omo left behind eating dirt.
Omo however isn’t the only Unilever brand in jeopardy. Brands like Unilever’s Lifebuoy soap which was introduced in the early 2000’s onto Uganda’s market to compete with Reckitt Benkister’s Dettol showed a flicker of hope that was soon blown out. Lifebuoy soap is now scarce in most supermarkets and retail shops country wide as people have opted for Protex, Dettol, Skin Care, and others mostly Movit Products.
Blue band is still Unilever’s main stronghold in Uganda’s market right now. However, their monopoly is being greatly encroached on by Prestige Margarine which consumers claim tastes better than Blue band. Go into any supermarket in the country right now and you’ll see the two on shelves next to each other with prestige significantly cheaper than Blue Band.
The invasion of Counterfeits
In September 2016, there were reports of fake Royco Mchuzi mix all over the market that was being packed by conmen and sold off, especially the 200mg beef flavor in plastic tins and were still supplying it to busy centers like in Nateete, Wandegeya and Kikuubo, downtown Kampala before Unilever made a move to stop it. The situation was so bad that the shopkeepers started asking the customers whether they want No. 1 or No. 2 of Royco Mchuzi mix. Unilever Uganda Ltd later re-launched the product with a new orange color to distinguish the fake and original spices easily.
The circumstances prompted a response from the Uganda National Bureau of Standards (UNBS) through their spokesperson Barbara Kamusiime who made a statement saying, “For the last two years Ugandans have been deceived and cheated by selling to them fake Royco, which puts their health at risk. The fake Royco is not authorized by any Government regulatory body.” Unilever Uganda had to solicit help from Unilever Kenya after sales fell substantially. Pheodor Njoroge, the head of shopper and customer marketing in the regional office based in Nairobi came to Uganda with the Unilever country director, Peter Muchiri with a rebranded beef flavor to salvage their market.
For two years, Ugandans consumed fake Royco without the knowledge of Unilever Uganda. Its only after things got so bad that sales started dropping then something was done. Need I mention that Unilever Kenya had to come all the way from Nairobi to solve the situation. What does this say about Unilever Uganda’s management and Unilever Group in general?
The root of the problem
Unilever’s problems are not only in Uganda. They stem all the way from the top. The CEO of Starbucks, a Unilever Partner, Howard Schultz put personal political views before shareholders when he aggressively challenged a number of policies that were promoted by the newly elected President of the US Donald Trump in a letter to employees. This did not sit well with Trump supporters and the backlash was instantaneous and #boycottStarbucks became a top trending hashtag on Twitter.
The actions of Schultz cower in the dark when compared to those of the Unilever CEO Paul Polman under whose regime Unilever has been involved in environmental and sexual harassment scandals.
Last year, Unilever settled with 591 workers in India over mercury exposure from a now closed thermometer plant following a 2006 lawsuit over exposure to the toxic element. Hindustan Unilever Limited (HUL) was forced to shut its thermometer factory in 2001 after Tamil Nadu state authorities found the company was contaminating the environment by dumping tones of toxic waste. The size of the payment was not revealed publicly, but both sides said it was satisfactory. The issue reached global attention when an Indian rapper’s song “Kodaikanal Won’t” that modified Nicki Minaj tune “Amaconda,” with lyrics addressing the mercury contamination problem hit the waves and drew 3.6 million views worldwide by the time Unilever agreed to pay up. The disturbing bit however is that even as Unilever paid, they kept on denying the allegations that 5 employees and 18 children died due to the toxic effects of the pollution.
In 2011 the Irish Times wrote a story that exposed sexual harassment claims from African workers that said they had to bribe supervisors to stop them from unwanted advances. The most recent cases of sexual harassment however come from Unilever Kenya’s tea plantation in Kericho. In response to these allegations, Unilever made an official response that on many dimensions took a defensive rather than proactive approach to the allegations, thereby falling short of its own commitments to due diligence.
In March this year. Unilever’s South African business was also mired with conspiracy when it was accused of collusion with a competitor by the country’s Competition Commission. An investigation by the Commission, found that Unilever and Sime Darby divided markets by allocating specific types of products and customers goods in the market for the manufacturing and supply of bakery and cooking products throughout South Africa. This conduct directly contravenes the Competition Act in South Africa. The Competition Commission wants Unilever to pay a fine of 10% of its annual turnover in a cartel case.
Without doubt, in all these scandals, Unilever’s business is suffering. The company’s 2016 fourth-quarter sales reported in January 2017 grew 2.2 percent which was lower than analysts’ expectations of 2.8 percent. Sales for the entire 2016 year were 3.7 percent below Wall Street’s estimates of 3.9 percent. To make matters worse the CEO rejected a $143 billion takeover effort from Kraft Heinz. Unilever’s stock had jumped about 15 percent after the bid became public but fell 8 percent following the company’s rejection of the takeover offer. Unilever’s decision perplexed Wall Street since the offer of $50 per share represented an 18 percent boost from its share price before the takeover bid and it would have resulted in valuing the company at 24 times 2016 earnings.
It’s evident to see that Unilever’s rot starts all the way from the top and from that poor leadership the entire brand that has net incomes of €5.579 billion (2016) is suffering. For how long can the shift hold on? It calls for strategy change to survive.