Going global

Growth of Wal-Mart and other global retailers also is driving the growing emphasis on big global brands over smaller, local ones among such heavyweights as Unilever, which has passed the halfway point of its plan to trim 1,200 brands from its global roster.

Charles Strauss, President of Unilever U.S., acknowledged in a December 2001 interview that growth of Wal-Mart and other retailers was a factor in the company's decision to focus its marketing and innovation efforts on bigger brands. What Unilever calls its "destination brands," such as Dove, Lipton or Slimfast, are important enough to consumers that even big mass merchandisers can't afford to be without them.

As potentially daunting as Wal-Mart's size is, Unilever and other home and personal-care players have learned that life with the retail giant isn't all bad. In fact, many of them, including P&G, Clorox and Dial, already derive 17 to 25 percent of their sales from Wal-Mart -- twice or more the proportion for some big food companies today. Yet their operating margins remain higher than those of food companies, despite dealing with so much power on the other side of the bargaining table.

Even relatively small players can play ball with Wal-Mart successfully. Dial Corp., a $1.3 billion company that markets Dial soap and Armour canned meats, is smaller than some brands at major food and non-food rivals. But Dial, which did more than 25 percent of its business with Wal-Mart, saw its market share for Armour and its other brands grow faster at Wal-Mart last year than in the rest of the market.

On the other end of the global heft scale, P&G does 17 percent of its business with Wal-Mart, nearly half of the 35 percent of its sales that derive from its 10 largest global accounts. But sales growth rates with the Top 10 run twice that of the company's overall growth, Chairman-CEO A.G. Lafley said at an investor meeting in December.

One reason is P&G's ability to execute marketing programs with Wal-Mart. A women's health program P&G sponsored in conjunction with Wal-Mart last year returned $5 in increased sales for every $1 invested, according to global marketing officer Jim Stengel.

Lafley believes that size ultimately plays to P&G's advantage in dealing with Wal-Mart and the other big retailers. "Retail consolidation," he says, "actually plays to our strengths."

 There goes the Neighborhood