A Small Deal for Unilever. A Big Signal of Transformation for CPG

Unilever's recent acquisition of Dollar Shave Club for $1 billion is a small deal compared with the size of Unilever. However, what it signals about the future for CPG companies is BIG.

Historically, CPG companies have implicitly assumed that brand equity, combined with an attractive value proposition, were the pillars of Customer Equity. This made perfect sense given the traditional CPG route to market through wholesaler and retailer intermediaries. The retailer has and remains in a better position to build retention/relationship with consumers.

But CPG companies are facing two strong challenges. First, the ability of their brands to command a premium price is often weakening; the performance of value brands is often at parity or at least "good enough". Second, retailers (e-commerce, bricks-and-mortar) are improving their ability to act on customer analytics to grow the retention/relationship component of Customer Equity.

Unilever's purchase of Dollar Shave Club is an acknowledgement of the importance of relationship equity. Since Unilever does not have a legacy shaving blade business, the decision to buy Dollar Shave Club does not create conflict with other Unilever brands. But what is P&G to do with its Gillette brand, or with its shaving blades business more generally, in an era where relationship matters at least as much as brand? And this question is not limited to shaving blades.

So, how does any historically product-driven company change how they manage Customer Equity in this new marketplace context? The first step is understanding the relative importance, from a customer perspective, of: (1) brand, (2) relationship, and (3) value-for-money.