The “Pauperization of Europe”
It started on Monday. “Poverty is returning to Europe,” said Jan Zijderveld, head of Unilever’s European operations, in an interview. The British–Dutch consumer products company, third largest in the world, was adjusting its commercial strategy to this new reality, he said, by redeploying to Europe what worked in poor countries of the developing world. Now the stars of the industry are affirming it. “The logic of pauperization,” L’Oréal CEO Jean-Paul Agon called it on Wednesday.
“If Spaniards are down to spending on average €17 per shopping trip, I can’t sell him detergent for half of his budget,” Zijderveld explained. “In Indonesia we sell individual packages of shampoo for 2 to 3 cents and still earn a fair amount.”
That this strategy was widespread in Asia I found out in Vietnam in 1996. I cut my finger at a table at a café in Hué as we were getting up. So, walking down the dirt street, I licked my finger to keep the blood from dripping on my clothes. The girl I was with, shocked by my barbaric behavior, took me to a street stall and bought me one singled Band-Aid, which cost as close to nothing as you could get. [My overland solo adventure from the Mekong Delta across Asia and Europe is the topic of a forthcoming book. The first in the series, Big Like: Cascade into an Odyssey—a “funny as hell non-fiction book about wanderlust and traveling abroad,” a reader tweeted—is available on Amazon.]
By looking at Europe, particularly Southern Europe, as a market with the characteristics of developing countries, Unilever has transitioned from seeing the debt crisis as a temporary event to seeing it as a trend to which it had to adjust its strategies. So now in Spain, it sells its “Surf” detergent in packages that are good for five loads. In Greece, it sells mashed potatoes and mayonnaise in small packages. And in Great Britain (!), it’s implementing the same strategy. Because people are running out of money. And it’s been successful. Since they started this in 2011, sales have stopped falling; and in the first half of the year, they edged up 1.1%. But higher input prices have exerted pressures on margins and profits.