By Natasha Khan and Sharon Terlep

For nearly a century, two companies behind some of the biggest household brands have been locked in a battle for cabinet space in homes across the world.

After a stretch as the laggard in the early 2010s, Procter & Gamble has overtaken Unilever with a strategy so simple that many doubted it: doubling down on its biggest everyday brands and improving their efficacy.

P&G, which gave up on the food business more than a decade ago, is booking record profit on its Tide detergent, Pampers diapers and bathroom staples such Old Spice and Pantene. Its share price has more than doubled over the past 10 years.

Shares of Unilever are up about 40% over the same period. The European giant makes Axe deodorant and Dove soap but is still reliant on food products and unpredictable emerging markets. It recently ousted its chief executive, saying it wanted to speed up the pace of its turnaround strategy.

P&G has carved out the strongest position among its competitors to weather what is shaping up to be a turbulent year. In the U.S., the largest market for both companies, consumer confidence is nosediving. President Trump is waging a trade war against some of America's biggest trading partners, stocks have been plunging and many people fear the U.S. economy could be tipping into a recession.

"Growth won't always come in a straight line. We measure progress in fiscal years, not quarters," Jon Moeller, P&G's chief executive, said in November at the company's investor day. "Our results show this is a strategy that will serve us well in good times and bad."

Not long ago, P&G was in a sales slump, and an activist investor was pushing the company to be more like its European archrival. Now the same activist is prodding Unilever to be more like P&G and slim down.

Fernando Fernandez, Unilever's newly installed CEO, said last week that there are about one billion euros, the equivalent of roughly $1.09 billion, of local brands in its European foods division that " don't fit well" with the company's portfolio and another EUR500 million, or roughly $544 million, worth of products in smaller markets that the company can't scale.

"My intention is to act on all of these, probably at a faster pace," Fernandez said.

A battle over razors

A decade ago, P&G had lost touch with the American consumer. It was also losing ground in China, its second-biggest market. U.S.-based rivals, Colgate-Palmolive and Huggies maker Kimberly-Clark, were moving more nimbly and stealing customers.

P&G's Gillette razor brand was under assault. A pair of upstart online razor sellers, the Dollar Shave Club and Harry's, were using cheap blades and pithy, low-budget ad campaigns to steal customers turned off by high prices on evermore sophisticated Gillette blades. Unilever in 2016 bought Dollar Shave Club for $1 billion, part of a string of acquisitions.

Nelson Peltz's Trian Fund Management scooped up some $3 billion in P&G shares by 2017 and launched a fight for a seat on the company's board. Peltz said P&G was hopelessly mired in the past. He said the company should acquire smaller, niche brands and bring in talent from the outside. He also wanted a corporate reorganization that would see the company split into three independent business units.

He held up Unilever as an example of a more successful rival, pointing out that the company was delivering high operating margins despite businesses geared to less-profitable products.

P&G executives argued the future lay in the same fundamentals that had guided the company for 180 years: trusted brands such as Tide and Gillette that can dominate their category.

Peltz's presence on the board, executives later acknowledged, forced P&G to more quickly disentangle an organizational structure referred to internally as "the thicket," where muddied reporting lines left executives with too little authority or accountability. The company joined peers in snapping up a few hot startup brands like Native body care and Tula skin care.

P&G's leaders bemused analysts with their frequent use of the words "irresistible superiority" -- a catchall term for a strategy to lure customers with new packaging, improved product formulations and marketing, and competitive pricing. But the strategy worked. P&G invested in making its Cascade dishwasher pods, Bounty paper towels and Tide laundry detergent perform better. When Covid hit in 2020, consumers gravitated to familiar brands. P&G notched its biggest sales increase in decades, riding demand for household goods as cleaning-obsessed consumers stayed home.

'Unmissable' vs. 'irresistible'

Unilever has a vast, global footprint. It sells dish detergent and toothpaste but gets about a third of its annual revenue from food and ice cream. More than half of the business comes from emerging markets.

Peltz took a position on the Unilever board in 2022 and pushed for changes, many following the P&G playbook. He said the company should improve its supply-chain discipline and focus on 30 "Power Brands" that represented more than 70% of its sales.

Not long after, Unilever added a new phrase to its lexicon: the goal of delivering "unmissable brand superiority" to consumers.

"I am not happy with our overall competitiveness," Hein Schumacher, Unilever's then-chief executive said in 2023, months after he took the job. "Our efforts are being spread too thinly."

Schumacher unveiled plans to simplify the company by spinning off its ice cream business, which sells the Magnum and Ben & Jerry's brands.

Unilever in February named Fernandez, its chief financial officer, as its next CEO. His mandate: faster and better delivery of the company's existing turnaround plan.

The company has been focused on introducing fewer, bigger innovations and shifting its portfolio toward higher-price products -- for example, shedding North America rights to the mainstream shampoo brand Suave and picking up high-end haircare brand K18.

Some investors say Unilever's household and personal-care business could be more valuable as a stand-alone unit because food businesses have lower margins. Unilever said it would speed up the sale of some food brands, while focusing on profitable ones like Knorr bouillon and Hellmann's mayonnaise.

The battle for market share will intensify in coming months, analysts say. American consumers are tightening their belts. China's economy is floundering. Steep price increases over the past few years have buoyed revenue growth across the industry, but consumers and retailers are balking at further increases.

Now the fight is for volume growth, said Filippo Falorni, an analyst who covers the consumer sector for Citi. "But not everyone can win."

Write to Natasha Khan at natasha.khan@wsj.com and Sharon Terlep at sharon.terlep@wsj.com

(END) Dow Jones Newswires

March 18, 2025 05:30 ET (09:30 GMT)

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