Lessons of The Dormouse, Tide Detergent and Grace Slick

Unilever's second quarter earnings report shows volumes up and profits down due to a reported combination of lower margins, higher finance and tax costs and an increase in pension costs.

New CEO Paul Polman (formerly of P&G) has reversed the former strategy of raising prices of former old Unilever CEO Patrick Cescau. Good move just in advance of a recession. I wonder if Pat also goes surfing just before the tsunami comes in.

So what are we doing here? Buying share? Fighting private label?

Unilever's brands are Ben & Jerry's ice cream, Dove soap, Lipton tea and Hellman's mayonnaise (all staples in my house). These brands are quality stuff and Polman's move marks a return to getting these well-branded goods back into the global pantry.

When I was at Unilever we always sold things a little cheaper because they weren't quite as good performance-wise as P&G's products (with the exception of Wisk and Dove), but they were certainly better than Private Label. Hopefully, these moves by Polman and his team only mark a short-term move to get momentum back into the business because those power brands now form the foundation of the Unilever business are The Goods.

(I should also note that all those brands I mentioned, except for Lipton Tea, were acquisitions. What happened to the Unilever detergent business? Sold.)

The Wall Street Journal notes that, in South Africa (a critical revenue-generating country for Unilever), the local company launched a lower-priced version of Surf laundry detergent to compete against a low-priced local competitor.

Meanwhile, in the US, P&G has rolled out Tide Basic, a lower performing version of Tide that costs 20% less.

Ouch. Those actions are two moves guaranteed to make your Brand Equity look dingier.

Over the long run, the best way to compete with Private Label is to keep innovating on performance, ensuring that consumers really understand the value proposition of what they are buying. At SmartAnalyst, we are in the process of conducting a series of consumer surveys on attitudes toward Private Label and, guess what, people like brands.

Let's hope that, for P&G and Unilever, the Innovation Cupboard isn't bare. In Lynne Banks The Indian in the Cupboard, there was always a new magic trick to save the day until the Indian and the Cowboy had to go back in time.

Maybe those two great companies can still pull a white (not a dingy) rabbit out of their respective hats. Otherwise, they may be joining Grace Slick in a chorus of

When logic and proportion are sloppy dead,
and the white knight is talking backwards
and the red queen's off her head,
Remember what the dormouse said,
Feed your head, Feed your head.

That is where insight yields innovation.