Unilever: Create or Be Cremated
By: Aly Dayani & Sajin Kowser
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
Creative Disruption
The consumer packaged goods (CPG) industry’s relationship with creators and influencers is an evolving one. Influencers — individuals who have large and engaged audiences that consumer brands view as valuable potential customers — often use their followings to command high-paying endorsements and ad deals. More recently, however, emerging creator brands are starting to capture a growing market share from their traditional counterparts. For example, KSI & Logan Paul’s “Prime” Drink has generated $250 million in retail sales in their first year and $45 million in sales this January alone, making it one of the fastest-growing beverage brands in history. Similarly, Mr. Beast’s Feastables have generated over $10 million in sales in just a few months since its launch, while Kylie Jenner’s Kylie Cosmetics has captured 12 percent of cosmetics and make-up users in the United States. This is not exactly music to the ears of executives at Coca-Cola, Hershey’s, and L’Oreal.
Content Driven Rather Than Influencer Driven
This shift is forcing traditional brands to adapt their customer acquisition strategies, and content-driven customer acquisition has emerged as an attractive alternative to costly advertising and marketing campaigns. Recently, CPG companies have invested a lot in influencer efforts for the promotion and marketing of their products. However, the nature of this marketing is poised for failure. Influencer-driven marketing relies on the endorsement of social media influencers to promote the brand to their followers. While this approach could be effective in reaching a wide audience, it could also be costly and less authentic, as consumers may perceive the influencer's endorsement as insincere or inauthentic. Relying on influencers to promote a brand means that the brand is essentially "renting" the influencer's audience and must constantly pay to access that audience.
In contrast, content-driven customer acquisition is different from influencer-driven marketing strategies because it involves creating and distributing branded content directly to potential customers, rather than relying on influencers to promote the brand. In content-driven customer acquisition, the focus is on “owning” high-quality content that engages and educates customers, building brand loyalty and trust over time. This approach allows brands to establish a direct relationship with their customers and create a unique brand identity that differentiates them from competitors. Content-driven customer acquisition offers a more sustainable and cost-effective approach to building brand awareness and customer loyalty, while also providing a platform for ongoing engagement and relationship-building with customers.
Brands like Kim Kardashian's SKKN and Mr. Beast's content-driven marketing have shown that the key to success in the CPG industry lies in reducing the cost of customer acquisition. For CPG businesses to remain competitive in the long run, they must become content businesses and differentiate themselves through compelling content that resonates with their target audiences.
Momentum is Slow
One of the challenges Unilever faces while beginning to adopt the content-driven strategy is the need to create high-quality, scalable engaging content. In 2016, Unilever invested €250 million in U-Studios, an in-house digital agency that specializes in creating scalable digital, needs-based content and social advertising. Despite U-Studios expanding to 21 studios across 18 countries, the company reported just 3,000,000 annual engagements through their platforms in 2022. Considering the recent boom in digital commerce, paired with the company’s 400 brands across 190 countries, there is ample room to grow engagement past a few million every year.
The recent explosion in digital commerce now represents 15 percent of Unilever’s business and grew last year by 23 percent. This trend further highlights the need to heavily invest in talent and infrastructure. In doing so, the CPG giant could build out its content creation capabilities, as well as find ways to integrate content-driven customer acquisition with its existing marketing and distribution channels.
Another potential challenge for Unilever is the need to stay on top of changing trends and consumer preferences in the content space. As new platforms and formats emerge, Unilever must be ready to adopt new and more suitable approaches to content creation and distribution.
While Unilever has made progress over the past few years in this area, they are not as well-equipped as creators who launch their own brands. Creators who launch their own brands have a deep understanding of their audience and are better positioned to create content that resonates with them. Additionally, creators who launch their own brands have already built a strong brand identity and loyal following, making it easier for them to introduce new products and drive sales. Unilever may face challenges in building a similarly strong brand identity and following, given its traditional image and the perception that it is a large, impersonal corporation.
The Time is Now
The current business environment presents a unique opportunity for Unilever to go all in on content-driven customer acquisition. The rise of creator brands and their disruptive impact on the CPG industry is a clear sign that traditional marketing strategies are no longer enough. Creators like Mr. Beast and KSI have already entered the consumer goods space and launched successful products that are taking market share rapidly. With the increasing popularity of creator brands and the likelihood of even more creators launching their own goods in the future, Unilever could not afford to fall behind.
By investing in content creation and distribution, Unilever could establish a direct relationship with their customers, create a unique brand identity, and differentiate themselves from competitors. Content-driven customer acquisition offers a more cost-effective and sustainable approach to building brand awareness and customer loyalty. Now is the best time for Unilever to make a bold move and fully embrace the content-driven approach to customer acquisition.
Why Would It Work?
Case Study: Penn Entertainment & Barstool Sports Acquisition
The acquisition of Barstool Sports by Penn Entertainment, formerly Penn National Gaming, is a major success story in the world of content acquisition. Penn Entertainment, a major casino and gaming company in the United States, was struggling to attract a younger audience to its gaming products. To solve this problem, it acquired a 36% stake in Barstool Sports in 2020, a popular digital media company and sports blog, and since then in 2023 completed its acquisition and acquired the remaining interest.
The acquisition gave Penn Entertainment exclusive access to Barstool Sports' library of sports content, including articles, videos, podcasts, and social media posts. Additionally, it allowed the company to promote sports betting and gaming products, and engage with Barstool Sports' audience through exclusive promotions. The two companies worked together to launch Barstool Sportsbook, which has since seen significant success, with 400,000 customers registered in the first seven months and generated over $660 million in handle, for more than $61 million in gaming revenue.
The success of this acquisition could be attributed to a number of factors. First, it allowed Penn Entertainment to access a younger demographic through Barstool Sports' large and engaged audience. Additionally, it gave them access to high-quality, branded content that could be used to promote their gaming products. Finally, the two companies were able to work together to launch a new product that was tailored specifically to Barstool Sports' audience, resulting in a highly successful partnership.
Similar to Penn Entertainment's acquisition of Barstool Sports, Unilever could benefit greatly from acquiring a content production company such as BuzzFeed. By acquiring a company with a strong content creation team and a large and engaged audience, Unilever could better connect with consumers and create high-quality branded content that promotes its products. Additionally, a partnership with BuzzFeed could result in the launch of new, innovative products that are tailored specifically to BuzzFeed's audience, resulting in increased revenue and market share for Unilever.
Case Study: Red Bull’s Acquisition of Two F1 Sports Teams
Red Bull's acquisition of two Formula One (F1) teams, Red Bull Racing and AlphaTauri, is another example of a company with strong products acquiring content production companies. The F1 teams serve as a platform for Red Bull to create and distribute branded content, engaging with audiences and building brand loyalty over time.
Red Bull's strategy is to create a lifestyle brand around extreme sports and high-energy activities, which aligns well with the adrenaline-fueled world of F1 racing. The company's focus on content-driven customer acquisition has allowed them to establish a direct relationship with their audience, creating a unique brand identity that differentiates them from competitors.
Through their ownership of the F1 teams, Red Bull has access to a variety of content channels, including live racing events, social media, and branded video content. This has enabled them to engage with a younger, more diverse audience, building a loyal fanbase that extends far beyond the world of F1 racing.
By investing in content production and distribution, Red Bull has been able to create a powerful brand that resonates with audiences across multiple platforms. The success of their F1 teams is just one example of how content-driven customer acquisition could help companies build brand awareness and customer loyalty in today's rapidly evolving digital landscape.
Instead of Picking a Niche, Pick BuzzFeed
Unlike Red Bull and Penn Entertainment, Unilever operates as a much broader CPG business with less concentrated niches. Nevertheless, the company recognizes the significance of content-based customer acquisition and has made consistent efforts in this regard. However, due to the vastness of its portfolio, a tailored content studio may not be sufficient to generate significant synergies. Therefore, Unilever would eventually require a content creation engine that is equally broad in its scope. It is no secret that developing such an engine in-house poses challenges, and hence, Unilever should consider pursuing inorganic means to achieve this goal.
Luckily for Unilever, there are a few M&A candidates that produce a portfolio of content nearly as broad as the products it puts on retailers’ shelves — most notably, BuzzFeed. BuzzFeed produces a wide variety of content, ranging from investigative journalism to lifestyle and entertainment. It does so through its own website and video production, as well as its subsidiaries like HuffPost and Complex Networks, making it a diverse source of content for its audience.
The company’s YouTube channel has gathered more than 17.8 billion views and has over 20 million subscribers. As per Comscore data, Buzzfeed's content is being consumed significantly more by Gen Z and millennial audiences compared to any other digital media company focused solely on content creation. Further, management justified its recent investments by citing its vision of “cementing [their] leadership position as a discovery engine for the next generation of Internet creators”. Complex on its own is a significant content producer with a wide following. With over 6 million subscribers and 1.8 billion total views on YouTube, Complex has popular shows hosted by its own personalities who often engage high-profile celebrities. It also annually hosts an event called ComplexCon, which in 2019 attracted over 200 brands and hosted a record 60,000 attendees and influencers. It garnered 5.6 billion media impressions and grossed $25 million in retail sales
Despite the audiences it has captured and the content it has produced, BuzzFeed has struggled as a firm. The company went public in 2021 through a SPAC with a valuation of $1.5 billion. It is now worth ~$160 million. They have only generated a positive operating income in one out of the last five fiscal years (although this includes some unusual expense items). The Complex acquisition in 2021 was worth $300 million, almost double the whole entity’s current market capitalization. The standalone outlook for BuzzFeed is not pretty, however, this provides Unilever an opportunity to acquire this asset for relatively cheap at approximately $400 million relative to $42 million of 2021 adjusted EBITDA and $0.5 million in 2022. There is precedence for an acquisition of this nature as Unilever has spent over $10 billion in M&A over the last five years and records approximately $7 billion in marketing expenses on an annual basis.
Playing the Long Game
The synergies from an acquisition like this would be realized over the long term. BuzzFeed’s operations pose stark differences from the core business that Unilever currently operates. In the near term, without having to deal with the scrutiny of public market investors and with the help of Unilever’s broader business capabilities, BuzzFeed could focus on reaching modest but consistent profits.
BuzzFeed’s technology and content flywheel would fit in well with Unilever’s data-driven marketing strategy. On the surface, Unilever could take advantage of the content niches it would own after such an acquisition through effective product placement or development. Unilever's food and beverage brands could benefit from Tasty's food content and recipe videos to organically reach food enthusiasts and home cooks. Their personal care brands, especially those targeting younger audiences like Axe and Dove, could utilize Complex's youth culture content to connect with millennials and Gen Z.
However, the true value would lie in the following this content has created, and the abundance of related first-party data. In 2019, Unilever announced plans to invest two-thirds of the $2.16 billion generated from operational efficiencies into digital marketing — particularly to "manage the content-driven, highly-targeted, data-led campaigns''. In Q2 of 2022, Unilever CEO Alan Jope credited data-driven marketing as a driver of improved ROI. BuzzFeed has the content and data flywheel, and Unilever has the product portfolio and capabilities to take advantage. All that for a relatively cheap price once you consider BuzzFeed’s tumbling market value and Unilever's previous investments in this strategy.
