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What’s Next For Unilever plc?

Some companies appear, grow, boom, and then disappear in a flash. Some companies can be successful for years, only to find that technology has overtaken it: think of Kodak. Some businesses boom, and then evolve and find growth in a different field: think of Acorn Computer and ARM Holdings.

And then there are very few companies that seem to have success which endures over many decades. Unilever (LSE: ULVR) (NYSE: UL.US) is one of those companies. This business began as the soap maker Lever Brothers in 1885. In 1929 it merged with Margarine Unie to make it both a home and personal care company, and also a food company.

Decades of growth

Over the course of the last century it has grown steadily, expanding from the UK to Europe, the States, and then across emerging markets. From its first brand, Sunlight, it has developed Persil, Comfort, Lynx, Dove and a myriad other brands. From margarine it has developed Flora, PG Tips, Magnum and Lipton.

By building market-leading brands, and then taking these brands around the world, Unilever has grown all through the twentieth century. But at periodic intervals it has reinvented itself. At the turn of the century it went through dramatic and painful change, with tens of thousands of jobs lost, and a complete strategic realignment from the developed world to emerging markets.

The reshaped company has shown impressive growth over the past decade, with the share price more than doubling. But there seems to be more change to come.

A shift to higher-margin businesses

The company is still shifting its centre of gravity from developed markets, where sales growth has been lacklustre, to the emerging markets, where sales are booming. Plus the company recently sold its cooking sauces business Ragu. This signals a move away from lower-margin food businesses to higher-margin home and personal care businesses. In recent months the Ragu, Bertolli and Peperami brands have been sold. Global food sales now make up only 27% of Unilever’s total sales.

In the West there is a gradual move away from processed to fresh foods, and Unilever’s strategy is reflecting this. Basically, the company is trying to grow faster in areas where it is more profitable. Plus, after so many years when this firm has taken over business after business, and grown its size and scale, it is perhaps realising that in this modern, fast-moving world, the scale of a company no longer makes such a difference to growth.

So perhaps Unilever is looking ahead to a slimmer, and also more profitable, future.

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Prabhat does not own shares in Unilever. The Motley Fool owns shares in Unilever.