Lever Brothers Company

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Lever Brothers Company

390 Park Avenue
New York, New York 10022-4698
U.S.A.
(201) 871-3443
Fax: (212) 906-4411

Wholly Owned Subsidiary of Unilever United States Inc.
Employees: 4,462
Sales: $2.19 billion
SICs: 2841 Soap and Detergent; 2034 Dried and Dehydrated Fruits, Vegetables

Lever Brothers Company is one of the largest manufacturers of soaps and detergents in the United States. It is well known for such famous brands as Sunlight dish detergents; Wisk, Surf, and “all” laundry detergents; and Caress, Dove, Lifebuoy, and Lever 2000 soaps. Lever Brothers is a subsidiary of the Anglo-Dutch Unilever group, which includes more than 500 companies and has sales of more than $43 billion annually.

Lever Brothers Company has its roots with William Hesketh Lever, an English grocer. Beginning in 1874, Lever’s wholesale grocery business had been marketing a soap made specially for them called Lever’s Pure Honey. By the 1880s, Lever had concluded that he had expanded the grocery business as much as he could, and he looked for another enterprise. He decided to market soap. As a child, his first job in his father’s grocery store had been to cut and wrap soap. He knew the importance of a brand name that he could register for exclusive use and chose the name “Sunlight.” At first he contracted with various soap-makers to manufacture “Sunlight,” which he then packaged and marketed. In the mid-1880s, raw materials were cheap and workers plentiful, and Lever decided to set up his own soap-making plant.

Arranging a loan to start the factory as a branch of his family’s wholesale grocery business, William and his brother James began production. By January 1886, the plant was producing twenty tons of soap a week using the “recipe” for Sunlight soap (made from oils rather than tallow) that the Lever Brothers had perfected. Two years later, the plant had a capacity of 450 tons a week. Glycerine was a lucrative byproduct of the soap-making process, and by the end of 1886, Lever Brothers also had a glycerine factory. At first Lever was selling locally, then its market branched out to include Scotland, Holland, Belgium, South Africa, and Canada. In 1888, with the success of Sunlight, William Lever went looking for a new site for his company, which had been operating from leased facilities. He bought land on the banks of the Mersey River where he built Port Sunlight. Over a period of years, he bought almost 330 acres.

At first Lever manufactured only Sunlight soap. In 1894, though, he introduced Lifebuoy soap, a household soap with carbolic acid as a disinfectant. The new product also used up the residual oils left over from production of Sunlight. In 1899, Lever’s company also began producing “Lux” soap flakes.

Lever opened a small office in New York in 1895 to handle U.S. sales of Sunlight and Lifebuoy soaps. In 1898, Lever acquired a small soap factory in Cambridge, Massachusetts, the company’s first manufacturing operations in the United States. A few years later, the company acquired a factory in Philadelphia. The Cambridge plant did business throughout New England, and the Philadelphia plant distributed to the rest of the country. During the early years in America, neither Lifebuoy nor Sunlight sold well. Americans preferred large bars of soap because they seemed like a better value than the small tablets of Sunlight. Lever was more successful with its sales of “Welcome” soap, which satisfied Americans with its larger size. Sales of Lifebuoy soap and Lux finally started to take off, but Sunlight never did catch on in the United States.

Sales of Lever products in America were growing largely due to the management of Francis A. Countway, who headed U.S. operations for Lever Brothers. Beginning in 1912, he guided Lever Brothers American business for more than 25 years. He understood American marketing and Americans’ peculiar preferences, and gradually he persuaded the British owners that selling soap to Americans was very different than selling to Europeans.

In 1919, Countway reorganized the company. Recognizing that the markets outside of New England needed to be tapped, he divided the United States into ten sales territories. He gave up on Sunlight ever being a success in the United States and successfully promoted Lux, Rinso, and Lifebuoy as the mainstays of the company until 1925, when Countway launched Lux toilet soap. Lever had not been very successful selling directly to retailers, so Countway also brought the wholesaler or jobber into the marketing process.

Between 1920 and 1925, sales rose from 21,000 tons to more than 40,000 tons. Lever’s American concern was finally becoming a success. By 1929, it had become the third-largest soap and glycerine manufacturer in the United States. Competition was strong among the top three soap manufacturers: Procter & Gamble, Colgate-Palmolive-Peet, and Lever Brothers. Lever Brothers had given up on Sunlight, but Lifebuoy and Welcome were selling well due to heavy promotions which included gifts, special displays, demonstrations, and even door-to-door visits. But it was Lux that became its greatest success.

Lux had been touted as a soap suitable for washing woolen fabrics. But newer, more delicate fabrics were becoming available at low prices by 1913, and Countway began advertising Lux as a high quality soap that was suitable for even the most delicate fabrics. By 1919, Lever was selling a million and a half cases of Lux; its 1913 sales had been 3,000 cases. The introduction of Rinso soap powder was also successful, with sales rising from 64,000 cases in 1919 to 800,000 cases four years later. Lifebuoy sales had soared from 84,000 cases in 1913 to 550,000 cases in 1923.

Meanwhile, the parent company in England was in the midst of negotiations that would soon make Lever Brothers of America a subsidiary of a newly formed partnership. In 1929, after years of talks, Lever Brothers Ltd. and Holland’s Margarine Unie finalized a deal to become Unilever. They remained two companies with two sets of shareholders and two headquarters but one board of directors. Unilever Public Limited Company (PLC) was based in London and Unilever NV (Naamloze Vennootschap, meaning limited-liability company) was based in Rotterdam. Although legally distinct, they operated as one company.

Lever Brothers Company in the United States continued to fight for market share. While sales of Lux had surged in the 1920s, its growth had slowed down in the 1930s. But Lifebuoy was going strong, and Rinso powder sales rose from two million cases in 1929 to more than six million a decade later because of its suitability for use in the new electric washers that were being installed in many American homes.

Procter & Gamble was enjoying great success with its Crisco shortening; that product brought in nearly half of the company’s profits in the early 1930s. Countway thought Lever Brothers could take advantage of the lard substitute market as well. Delaying direct sales to consumers, Countway entered the market with artificial lard sold to bakeries. When the Depression brought low prices for lard and butter, the market for lard substitutes dropped. It was not until 1936, when the country was in the midst of a serious shortage of real lard, that Lever Brothers brought out its Spry shortening in the United States. By 1939, after a massive cross-country campaign to demonstrate uses of Spry, the new product had reached sales of 50,000 tons. In three years, Spry sales had reached about 75 percent of the sales of Crisco, which had been on the market since 1910.

Lever Brothers sales increased between 1929 and 1934, despite the Depression. This may have been due to Americans’ high regard for cleanliness, making soap a necessity rather than a luxury. Between 1929 and 1939, U.S. sales for Lever Brothers increased from $39 million to more than $91 million, and profits more than doubled, from $3 million to more than $7 million. During the 1940s, the company diversified further than soaps and lard substitutes. In 1944, Lever entered the oral hygiene market when it acquired the large Pepsodent Company, manufacturer of toothbrushes and tooth-cleaning products. In 1948, it acquired the John F. Jelke Company, a manufacturer of margarine.

Synthetic detergents were gradually taking over markets for soap products in almost all but the toilet soap segment, where it was difficult to develop a synthetic that did not leave a ring around the bathtub. Lever’s Dove, a synthetic toilet soap, finally met with success when it was introduced in the 1950s, but it was a costly product. Synthetic soaps caused an environmental problem because they formed huge collections of foam in rivers and sewer systems. Lever Brothers, like other soap manufacturers, worked to overcome this problem, finally developing more biodegradable detergents.

In 1957, Lever Brothers acquired the Monsanto Chemical Company’s line of “all” detergents, which included Concentrated “all,” Liquid “all” and Dishwasher “all.” This transaction resulted in an anti-trust suit by the U.S. Department of Justice which charged Lever Brothers with restricting competition by acquiring that piece of Monsanto which manufactured low-suds synthetic detergent, a product similar to one that Lever already made. Lever Brothers won the suit, arguing that rather than restricting competition, it was protecting it since both Lever’s and Monsanto’s products were losing money due to competition with “larger rivals” like Procter & Gamble. Lever Brothers Company successfully argued that if the businesses remained separate, eventually the larger rival would wipe both of them out, and that the acquisition of Monsanto’s detergents was actually helping to preserve a competitive marketplace.

Advertising dollars tended to spell the difference among several like products that essentially differed only by scent or color. Procter & Gamble spent massive amounts of money on advertising and promotion and controlled 45 percent to 50 percent of the household products market. Competition from Lever Brothers remained weak until the 1980s. Outside the United States, however, Lever’s parent organization, Unilever, was the leading manufacturer of detergents and margarine.

Low profitability was what had plagued Lever Brothers through the 1970s, according to Michael Angus, then Unilever PLC’s vice-chairman and head of Unilever’s North American operations. He was sent to the States to turn Lever Brothers around. He told Fortune magazine in 1986 that Lever Brothers “was in a vicious cycle caused by low profitability.” Low profits caused managers to cut costs, such as advertising, which produced lower market shares, lower volumes, and higher production costs. In addition, research and development resources had been reduced as management tried desperately to stay profitable.

Angus kept only the “best” corporate officers at Lever Brothers, letting many others go. He tackled the margarine business first, which was losing vast amounts on Imperial and Promise brands. He shut down outmoded plants and, for a time, contracted with Beatrice Co. to manufacture margarine for Lever. With the savings from shutting down plants and warehouses, Angus was able to begin updating Lever’s margarine factories and promoting other products more aggressively. With the acquisition of the Beatrice operations Shedd’s Food Products Company in 1984 and J. H. Filbert in 1986, Lever became the leading margarine company in the United States, ahead of Nabisco and Kraft. The acquisitions added production, food service, and private label operations. In 1985 Unilever spent $50 million to expand the laboratories and research staff at its Edgewater, New Jersey, research center.

Lever Brothers launched a string of new products in the mid-1980s. Both Sunlight automatic dishwashing detergent and Snuggle fabric softener managed to win 15 to 20 percent of U.S. markets. Lever also expanded its marketing of Surf powder detergent to compete with Procter & Gamble’s Tide. Lever Brother’s revenues shot up to $2.1 billion, a 55 percent increase over three years.

With the company becoming more diversified in the 1980s, Unilever reorganized Lever Brothers, forming three separate divisions: Household Products Division, Foods Division, and Personal Products Division. Following the acquisition of Chesebrough-Pond’s Inc. by Unilever, Lever’s Personal Products Division was transferred to this company. Lever’s Foods Division was spun off into its own operating unit, called Van den Bergh Foods, in 1989. Following these changes, Lever Brothers became solely a soap and detergent company.

Lever was now in a position to face Procter & Gamble more confidently in the household products division. Lever already had a winner with Wisk, first in the heavy-duty liquid laundry detergent market. Introduced in the 1950s, Wisk was largely unchallenged until Procter & Gamble marketed Liquid Tide in the mid-1980s.

In 1990 Lever Brothers introduced some innovative products, including Lever 2000—an “all-in-one” deodorant and moisturizing soap for the whole family—and Wisk Power Scoop, a superconcentrated laundry detergent. According to company literature, an ingredient in the detergant called lipase “unlocks the fatty matter that ‘glues’ dirt to fibers, making dirt linger in clothes.” Lever also brought out a liquid Dove and “all” Free: Clear, which contained no perfumes or dyes.

In 1990 the company also began using recycled plastic in its packaging, publicly committing to use 25 to 35 percent post-consumer recycled resins in half the bottles it sold in the United States. It also touted its Wisk Power Scoop as a step in the right environmental direction since it used less packaging per load than ordinary detergents. Lever announced that its new Packaging Development Center in Owings Mills, Maryland, was actively pursuing packaging that supported its environmental policy.

Lever Brothers pulled ahead of Procter & Gamble in the toilet soap category in 1991 with Lever 2000. This was the first time Lever had ever overtaken Procter & Gamble in a product category. Lever spent more than $25 million for advertising that year to make Lever 2000 the market leader.

Lever Brothers’ winning position in the toilet soap market convinced the company that it could dominate other market segments too. But Procter & Gamble, Dial, and other soap makers began to develop new products or reposition existing ones to capitalize on the market for “all-in-one” soaps. Soap makers collectively spent more than $183 million on advertising in 1991.