All Small & Private: Unilever Sells off U.S. Detergent Division

About a year ago, the Business Journal ran an article about the conversion of the laundry aisle to concentrated detergent. In June, we wrote about the expansion of the Wal-Mart Stores Inc. generic drug program.

A couple recent developments on both topics are worthy of a mention.

First up, laundry detergent.

Our story in the Aug. 13, 2007, issue focused on the pivotal role played by Unilever when Wal-Mart asked its detergent suppliers to begin offering concentrated versions of their products as part of its sustainability movement.

Concentrated detergent saves plastic, water, cardboard, fuel, time and money and all of Wal-Mart stores have been completely transitioned to the products since April.

Unilever first introduced a triple concentrated detergent in the U.S. in 1994, but it failed miserably in our bigger-is-better culture. But as an international corporation, Unilever was selling plenty of the stuff in Europe to comply with stricter environmental regulations.

Two years before its competitors’ concentrated products hit the shelves, Unilever was already selling All Small & Mighty, a 3X product.

Unilever invested a year redesigning the bottle for American desires for a spout and measuring cap. It spent millions overhauling its production lines in Baltimore to produce all its brands in double or triple concentrate form.

But the news of July 28 that Unilever had sold off its entire U.S. laundry detergent business showed that being out in front of green initiatives is no guarantee of gaining market share.

Unilever’s All, Wisk, Snuggle and Surf brands — as well as the Baltimore factory — were sold for $1 billion to private equity firm Vestar Capital Partners. The deal also included $375 million worth of preferred stock for Unilever in Vestar’s new company, The Sun Products Corp.

Vestar’s cash payment is roughly equivalent to the total annual sales of all Unilever brands in the U.S., which account for about 15 percent of the $6 billion detergent market. Compare that to Procter & Gamble’s Tide brand, which owns a 42 percent market share.

Keith Weed, Unilever’s global vice president of homecare and hygiene, said the company with market share as high as 80 percent in some parts of the world had been on a “David and Goliath” footing in the U.S. and selling the division “removes a drag from our business.”

“Our business in States is subscale,” Weed said. “To sustain this business going forward, this [U.S.] market needs to consolidate in order to be more effective to compete against the leader. The choice was made that there are better investment opportunities elsewhere in world.”

However, Weed noted the U.S. division has “momentum” based on the concentrated innovations.

“Now is a great time to sell with the business in good shape,” Weed said. “It’s time for next phase of development for the new owners.”

Wal-Mart Gains Share On Prescription Sales

There’s plenty of evidence to indicate Wal-Mart’s $4 generic drug offerings have put the brakes on drug price inflation since launching the program in 2006.

Now there’s evidence Wal-Mart is reaping the rewards.

A July report published by BIGResearch shows, Walgreens remains the top destination for prescription drugs with a 14.4 percent share. This, however, is down nearly a full point from the 15.2 percent share in July 2007.

Wal-Mart’s share went from 8.4 percent to 10.4 percent; CVS lost a little less than half a point share to 13.2 percent.

Wal-Mart also gained big among households with incomes greater than $50,000, growing its share of those coveted customers to 8.2 percent from 6.3 percent a year ago.