Background

• -Unilever first established good agricultural practice guidelines in

1998, outlining sustainable farming practices for suppliers of major
crops (tea, palm oil)-First of their kind in the industry, but compliance
with the guidelines was not mandatory for external suppliers-In 2006,
Lipton Tea's Global Brand Director Michiel Leijnse began a larger
process of transformation towards sustainability, from an internal
commitment to a consumer facing initiative-A key part of this was
achieving Rainforest Alliance sustainable agricultural certification for
all suppliers
• Unilever's 'Sustainable Living Plan' first announced to public in 2010
• -Grew from range of external and internal challenges the company
knew would affect it and the world at large in coming decades-
External: Food security, poverty reduction, sustainability of resources,
climate change and social, economic and environmental
developments
• -Internal: Geographically diverse and highly fragmented supply chain-
Unilever had to determine if and how its move to sustainability would
translate to market advantage. Could it even achieve its goals of
sourcing all inputs sustainably by 2020?
Why was tea supply at risk?
• Geographically diverse and highly fragmented supply chain (Passport:
World Green Tea Growth Prospects, 2015)o Market advantage would
become an issue if nothing changed• Strong preferences and
different usages of teao Cultures with tea in everyday rituals vs.
cultures with tea as a delicacy• The workforce involved in the
producing and harvesting of tea o Year round, handpicked, in different
climates and altitudeso Exposure to pesticides and agrochemicalso
Low wages, lack of medical care
Why did Unilever commit to sustainably
source 100% of its tea?
• If Unilever did not commit 100%, market advantage and consumer’s
brand loyalty would be in danger (Passport: Lipton: Hot Tea and RTD
Tea Major Market Sales, 2014)• Unilever understood early ono If
nothing were to change, the quality and quantity of tea could not be
sustained• In hopes to better the industry, not just the companyo Tea
workerso Consumerso Environment• Keeping ethics and morals a
large part of their businesso “going green” was more than an
advertisement pieceo Making a difference on a global scale
Has Rainforest Alliance certification been a
success for Unilever?
• Allowed Unilever to transform its supply chain and reposition itself as a
progressive, environmentally friendly and socially aware organisation that sought
to reform the tea industry -Certification improved performance in important
markets:-UK: Market Share +1.8%, Sales +6%, Repurchase Rate +5%-Australia:
Market Share +1.6%, Sales +11%-Italy: Market Share +2%, Sales +10.5%, -
Pursuing certification led to: higher quality produce, greater crop yield, reduced
operating costs, stronger relationships with better-educated and motivated
suppliers-Costs of supplier certification were absorbed by Unilever, and the
benefits have been eroded by competitors attaining their own certification,
reducing marketing potential-Certification has become "a cost of doing business
and less a source of competitive advantage" (Henderson and Nellemann, 2012)-
"An example of radical innovation for sustainable agriculture is Unilevers
transformation." (Szekely and Strebel, 2013)-Unilever demonstrates how
businesses can "address and improve the environmental and social impact of
their operations." (Emerald, 2012)
Assess the supply chain and marketing
efforts.
• Unilever underwent a major transformation of the supply chain and
subsequent marketing. This transformation was designed to allow
Unilever to have a supply chain that was sourced 100% sustainably by
2020.
• Why restructure and certify? Klassen (2010) writes that the two main
purposes of having a socially responsible supply chain are to
reposition products to a market segment that is sensitive to
responsible sourcing and to avoid criticism and negative publicity
from NGO’s.
How to initiate change
• Unilever presents a third option. Restructuring of the supply chain into a
sustainable and responsible organism allows for the future prosperity of the
company.
• Initially, Unilever had a highly fragmented supply chain consisting of a handful of
large estates mainly In Africa and hundreds on smallholders in various tea
producing regions such as India and Turkey.
• Transformation required the use of a third party auditor (Rainforest Alliance) who
would mark the estates on criteria that included worker welfare, personal
protective equipment, child labour, sustainable practices (such as picking and
cultivation techniques).
• Certification was difficult across different countries, India proved to be
particularly difficult as there are little government regulatory devices in place to
restrict non-sustainable practices, mainly the use of toxic pesticides and child
labour.
Kenya -Flagship Estates
• Lead farmers were elected to receive training in sustainable
techniques and practices, these lead farmers would then train 300 or
so other farmers to develop a sustainable region.
• Once certified, estates and smallholders would have to renew their
certification every few years.
• Unilever's investments had had positive impact on growers of Kenya.
Certificate renewal proves that the restructure could work, it had
been very successful in changing Kenyan estates.
• It now needed to be replicated and tailored to suit other markets.
European markets
• European supply chain management was largely successful with the
notable omission of France, which did not respond well to the change in
packaging.
• This was an issue that had been highlighted by previous research, French
markets tended to be easily alienated by packaging changes.
• Ireland and England experienced net growth in both market share and
sales after restructuring the supply chain for those markets.
• Russia and Turkey remained relatively flat by comparison to pre-structuring
levels and in comparison to other markets. Unilever did not tailor their new
marketing strategy correctly to these markets
• Should Unilever adapt their marketing campaign to be tailored to specific
markets and demographics?
Hit or miss?
• Unilever was very successful in some markets and was ineffective in others.
Their strategy cannot be truly described as 100% successful.
• Globally, they did an adequate job of marketing their changes in product
and supply chain to reach their target market, it was only a few individual
markets that recorded little traction, namely France, Russia, Turkey.
• Mahanta (2012) claims that the market strategy of tea sourcing has shifted
from the tea seller to the tea buyer. Unilever had to shoulder the challenge
of converting its entire supply chain, rather than sellers having to change
their approach in order to sell to Unilever.
• They then had to adapt their marketing campaign around this change, this
explains why some markets were successful and others were not, it
depended upon the suppliers
Global Marketing
• Unilever globally re-imagined its marketing campaign across all its tea brands in order to
incorporate its new sustainable supply chain
• This is a positive change for most markets; it allows eco-aware consumers know of the
conservation work undertaken by Unilever. This in turn creates greater market share
from a new market segment that was previously inaccessible.
• Therefore whilst Unilever was successful in adapting its campaign around its supply
chain, it was less successful at adapting its campaign to global markets.
• One challenge for Unilever is the increasing amount of competition in the eco-ethical
market. Today, most major competitors have pursued certification, allowing them to also
use ecological and sustainable conservation in their marketing campaigns.
• Unilever now faces an environment in certain markets (such as the Indian and Turkish
markets) where they cannot farm the amount of tea required to meet their own targets
and they cannot differentiate their product on ecological sustainability. Unilever needs to
continue to find new and innovative ways to promote their products in a global industry
Unilever in India
• India is a major tea producer and consumer (Passport: Tea in India
2015)Produced 944 million kilograms of tea in 2007 (der Wal
2011)Many small scale farms and turbulent nature of practices
(Passport: Hot drinks in India 2015)Unilever has been in India since
1933Hindustan Unilever Limited (HUL) is Unilever's subsidiary in India
What should Unilever do with its tea business
in India?
• Sustainable Trade Initiative (IDH)The establishment of a sustainable
tea code - trustea (Hindustan Unilever Limited 2015)Raising people's
awareness and appreciation of environmental issues Following a
similar process to the actions taken in Turkey (Henderson and
Nellemann 2012)Use similar tactics to the certification of Kenyan
farms
Should rainforest certification be done in
india
• Need to consider differences between Western and developing
marketsWill be a long-term processThe growing demand for
sustainable products and the sustainability of the organization
suggest that Unilever should pursue certificationBut need to ensure
farms are monitored for compliance or else the company may lose its
credibility
Do you think Unilever should market
sustainable tea to consumers?Why?
• -77% of US shoppers said: "sustainability was an important factor
when deciding what to buy." (Cone Communications, 2014)-53% of
global respondents said a products sustainable sourcing was
important when purchasing (Passport, 2012)-83% of US shoppers
plan to live more sustainably in 2015 (Tiller, 2014)-"The benefits of
being seen as a role model for corporate citizenship, or as a leader on
social and environmental issues can be significant for businesses."
(Smith, 2008)
• -Products sustainability is a means of differentiation in a crowded
market and appealing to customers-Provides Unilever with a strong
moral and ethical platform to market from-"Higher level standards are
competitive and used to create consumer value by supporting claims
for superior products and brands." (Smith, 2008)-Since many
competitors are pursuing sustainability targets, a decision to not
market Lipton tea as sustainable would undermine Unilever's hard
work and monetary commitments - "Research shows that shoppers
are becoming ever more interested in the way their food is produced,
especially in the face of the negative publicity surrounding modern,
efficiency driven production processes." (Passport, 2012)