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CNBC Transcript: Interview with Keith Weed, CMO of Unilever

Following are excerpts from a CNBC interview with Julia Chatterley and Unilever CMO, Keith Weed. The excerpts are taken from CNBC's new show, Marketing. Media. Money.

JC: Keith Weed, thank you so much for joining us on Marketing. Media. Money. I want to start by talking to you about the changing landscape for the way consumers consume content: Can you tell me just to start how you divide your budget between digital media and more traditional forms?

KW: Well it's great to talk about this topic, Julia, because this has really been such a transformation. And you're right the big change is between traditional and digital but that in itself, of course, is getting increasingly a poor comparison because you're lumping together traditional TV, cinema, posters and newspapers which have all got their own dynamics, and then in digital, you've got social, mobile, e-commerce and search etc. But really, it depends on the market. But what we want to do is connect with people where they're spending their time, we want to fish where the fish are! So in the U.S. and China, for example, 35/45 percent of our media spend, is now in digital. The U.K. is also a highly developed market. If you go and look at India and it's really, all this is based on the connectivity available to consumers once they have the opportunity they go there, don't worry. But in China then it's more down sort of in the low double digits. But it's changing rapidly its changing rapidly.

JC: But if you want to establish and to really strengthen that direct to consumer relationship then at the heart of that surely is mobile?

KW: Absolutely and this is, this is the real fun. Every day two billion people use our products and we are everything from washing powder through to the world's largest ice cream company, the world's largest Tea Company. So we're interested in connecting with people. But the only way you could do it before was broadcast so you'd basically take a message and then you take the same message to as many people as you could and you wanted to get reach and etc. But of course now you can start picking people off individually.

So the good news is it means, you're right, we as manufacturers, as brand builders, can have a one to one connect. I think the bad news is we have to think a lot more carefully about that connect. It's a much more personal connection and things that people are quite happy to sit in a cinema and see with lots of people is very different from what you're willing to have when you know you're by yourself in your home, maybe sitting up reading in bed or on your mobile. So I think you have to think about context a lot more and a mobile, by definition, can go to different places: you can be in a park one day, you can be in a train the other day, you can be home another day and that's more of a challenge.

JC: I recently spoke to the SKY CEO and he said to me actually the price per minute spend on advertising, on forms like social media, is far higher than it is for television because the engagement is higher for TV.

KW: I think the first thing is to think about is actually the biggest thing that drives engagement is the quality of the creative and I know we now talk about media, media, media, all the time and that's the biggest change and that's why it's so exciting. But actually a little bit for us marketers and brand builders - we've got so much choice now that we didn't have before. So, the first thing and the most important thing, and we have to think about that as brands generally because if I say to you now, can you think of a bit of brand advertising, the ones that are coming into mind are the ones that are doing a good job because they're breaking through the clutter and they're leaving memorable ideas and that's got to be the first thing.

Then, you have to think about who is my target. Now, of course, you won't be surprised if I then start talking about young people vs. old people that there are more old people watching television and there's more young people online and all those generalities go. Television is still fantastic, we love television. I love television. If you want to reach and you want to get lots of people, Television's brilliant and because the change is all around mobile and social, everyone's talking about that but television is not at all dead. Television is alive and well, and thriving.

But what it really comes down to - and this is the opportunity we now have with digital - it's about the individual. What's the price of that individual? And it's no longer just counting "we want to have you know X thousand 18 to 35 year old housewives" or you know those are the terms we used only but 10 years ago. We can be much more targeted about "we want to speak to someone who's interested in….clothes, in home baking" and now we can start doing that targeting. And with that targeting become greater efficiencies.

JC: This targeting actually is one of the big question marks I have about what you do in your business. I mean as you just pointed out you speak to two billion consumers on a daily basis or you reach them but actually how much data, how much information do you actually know about those consumers? As far as I can see you actually don't have a centralized system of collating that kind of data, you rely on a third party. So isn't that data limitation actually a huge limitation for your business?

KW: Well you won't be surprised to hear actually it's a huge opportunity. So, in fact, yes we are building data so we have data ourselves and, of course, we also buy data from the likes of Google and Facebook as you would imagine. But we're also building our own. If you just look on our Care Lines, people answering the phones - so I'm not talking about writing letters or being on social media, just answering the phone - We have over 10 million calls a year of talking directly to people. Taking that sort of data and then putting on top of it the Facebook data and also then what we get from cookies starts creating much more vivid pictures of people, and, of course, this also enables us to do programmatic buying which is one of the buzz words people are talking about "programmatic buying" and it's much more simple than the term sounds. All it very simply is, as that page loads up in front of you, a message goes out to all the people who are interested saying the person's about see this is interested in cars sports or whatever the particular profile. And then we all bid in real time, I say we, our machines and the highest person gets it and then as the page fills up then here is the ad for Axe or Dove for Men or whatever.

There are 100,000 options of the ad that can turn up and in those literally tens of milliseconds when the page is filling up, that assembles and arrives in front of you. How exciting is that you can actually start providing content to someone about what they like and what their interests are about. NOT giving you an ad about what you're not interested, they give you an ad about what you are interested about.

JC: Talk to me about Ad blocking then because this is another definitive moment I think in the advertising industry. We've got a number of the media providers coming out and saying look actually we can't survive without this and trying to find innovative ways to get cash in other ways for your business again this is a huge limitation potentially.

KW: Well it's a big challenge for the industry because at the end of the day all media, the free media, is paid for by advertising. And, of course, if that advertising stream goes elsewhere maybe into sponsorship etc, then the quality of that content will go down. Less funds, less quality content. So it is a challenge for the industry. I think this is a challenge actually back to the brand builders and the advertisers and the advertising agencies. Because why do people block ads? They block ads because they're irritating in some form or other. So we've got to find better ways of making great content that really engages people and I think there's a real think do gap right now in Mobile….

So a lot of advertising agencies, media companies, brand advertisers, like ourselves talk a lot about mobile. Everyone talks about mobile. There are more mobiles on the planet than people, there are two billion smartphones and the next billion people who come online will be on mobile, I can give you mobile stats until you're red in the face. However, what we're talking about mobile and what we're doing on mobile is very different. So, I can show you some fantastic to this day creative ads on the TV and cinema and then you go down to mobile we really haven't cracked it….

JC: So we're joined by Charlie Crowe, guest contributor and market expert. Charlie, give us your assessment of Unilever's marketing strategy: what do you think, what would you change?

CC: What would I change? Goodness me. I would say there's probably four broad issues that Keith and the team at Unilever faces and one is relevance. You know in 10 years' time, well over two billion people on the planet will be quote 'millennials' those are people aged 18 to 35 in the catchment area of most of the brands that Keith looks after. You know that's not very far away and these are people who's not only media habits are very, very different but actually the fundamental attitudes towards brands is very, very different and I you know I think there's a big issue about salience and relevance of those brands. So that's certainly one of them. The second is obviously digital transformation looking at e-commerce. I think one of the key issues, I would say with Unilever right now is that they haven't probably moved fast enough into e-commerce. Probably one of the main reasons why Goldman Sachs downgraded the stock last year, I would say that's a fundamental thing that they've got to get right. They're still structured very much in many ways in that old sense you know they need to centralize their data. They need to understand commerce much more. Some people cite Nestlé as a company that's probably moved a bit more quickly into that field through the Nespresso business and so on. So I think that looking at their relationships with old school retailers and how they can move beyond that is fundamental. It would be interesting to hear from Keith about where he believes e-commerce, as a function, should sit actually in an organization, it's such a big issue. Again on digital transformation, what leadership is Unilever showing given that almost 50 percent of it's the budget in the States is now digital: What leadership is it showing in areas such as fraud? I mean it's claimed by White Ops, a leading consultancy, originally a banking fraud company that about seven billion dollars globally is lost in the market every year for companies paying for traffic that's ultimately been generated by Bots.

JC: I want to stop you there. [To KW] Come back on the e-commerce point.

KW: E-commerce is a big part of what we do already and so you won't be surprised that we're big on Amazon etc. What the curve of e-commerce, as you've seen has been around devices and electronics and books, I think it's a reasonably high value and easy to ship and it's, you're right, it's moving into consumer goods right now but I would absolutely push back and say we're very much up and on the front foot of e-commerce and where we are in all our categories. So I think the point that Charlie makes is very relevant that there's a big shift going on but I think what you don't want, you either want to be very small right now and niche or you want to be very big with lots of resources, learnings and capabilities.

JC: Do you think the Goldman Sachs downgrade then was wrong? What were they missing about your business because it seems like Charlie's missing it too because he also believes it's a limitation…

KW: Well at the end the day I'm a bit closer to it than either of them so I don't think it's a limitation. I do think that right now it's a big fast growing area across the whole of consumer goods...

JC: Do you think they just don't understand what you're doing? They don't understand the scale of what you are doing? They don't see that you do?

KW: Well, no I think if you compare across industries, different industries have a different profile right now, that's true. We were right up there at the very, very beginning visiting the Facebook's, the Googles, the Twitters. In fact, interestingly when I was first in this role and went to Silicon Valley Twitter didn't even get a meeting. Twitter got a conversation over the bar before we went to dinner and look at Twitter now: 230 million people on Twitter. And I think what the changes have happened, have happened very rapidly. So I think we were absolutely the right pace and ahead of the game in the brand building advertising world on digital and I think we've repeated again in the consumer goods in e-com and I think we're in a very good place. So I refute that, but anyway Charlie is very entitled to have his opinion.

CC: It would be interesting to know what Keith's view on Twitter is given the current discussions over the future of that business model and whether advertising, native advertising, is truly capable of resonating on that particular platform. What do you think?

KW: Well I think right now Twitter is still 230 million people. If we're talking about a TV channel we would be thinking oh what a tremendous success. Of course what we do is we then compare it against a Facebook and a Google and we see different scale. I think there is a real role for in the real time engagement and that's been one of the wonderful things about social media. It's given real immediacy which you didn't get in TV which is recorded one day and seen later. And I think that's still very relevant now to Charlie's point. Twitter need to unlock where they are right now. But even where they are by now we've done some fabulous stuff particularly on Dove on Twitter in real time engagement and well, go and look at Twitter's annual report and you'll see the Dove case study there yourself. So I think if you get it right and I come back to this point about the most important part is the creative rather than the media. We're talking about media but if you have great creative it can be fantastic on TV, it can be fantastic on social, it can be fantastic on search. It's the creative that's the important part.

JC: Let's talk about fraud because you mentioned this as well I mean the stats that I saw one dollar in every three dollars of advertising spend is sucked up by fraud. This has to be a huge concern for you too?

KW: Yes and it comes back to this whole area of programmatic that we were talking about and you need to have a really good quality solution. The good news is an independent survey done in the U.S. on Ad fraud had Unilever right at the very bottom and of course that's reassuring to me because I obviously run our media department as well in my team. I think you have to be really aware of it and I think you have to be really careful about it to the point Charlie was mentioning earlier the good old bots. If you put together the good bots and the bad bots you're talking about 60 percent of the traffic on the Internet. So us mere humans are less than 40 percent of the traffic on the Internet. The good bots are going around trying to catch the bad bots. Imagine what's happening. But there are more bad bots than good bots, only just. So I think it is important to make sure you have really robust ways and that's why you know when you say that something seems a deal that's too good to be true it probably is and that's why you've got to be really careful about bundling etc.. But we're pretty confident that, you know, we work with very highly qualified global agency and WPP and Mindshare and we have 10 different ways of checking everything and I think in that case you've got nothing to fear. If you buy it badly, you've got everything to fear.

CC: I think there's a couple of interesting points that come from that. I mean it's not necessarily Unilever's fault that there are these bot traffics. This is illegal activity and some might argue that it's the publishers actually that are perpetuating this issue particularly when you look at the detail and you see that sourced traffic tends to be more fraudulent. That's traffic that's acquired by publishers to boost their audiences so buying other traffic on other people's site. Unilever has a really great opportunity to show leadership in this area and I think that would be fantastic to see to see more of that. The second thing to reflect on that is this agency model question. Unilever have very strict corporate codes and it's very strong. What I'd be interested in hearing Keith's view on is this issue of programmatic through his agencies and whether the disclosed model, so that's part of the WPP offer is being able to be transparent on the media you're buying the pricing, and the non-disclosed offer which is a significant part of WPP business, fundamentally changes the nature of what an agency is when an agency actually owns the infantry that its then selling on to its clients. I'd be interested to know what Keith's view is on the debate over disclose versus non disclose…

KW: I don't want to get into areas of competitive advantage so I'm going to steer it away from this but just to reassure you I'm very happy with the way we work with WPP on this. And the sort of points you're raising are the points that you need to be aware of but if you build a better mousetrap you don't want to tell too many people what your mousetrap is I'll keep my better mousetrap.

JC: But is it down to scale, is it down to the sheer weight because this is the point.

KW: The scale helps. I'll tell you what scale helps. Scale helps because you can innovate. But, of course what we're also doing is learning, and learning in real time and so the scale of it I suppose gives me the opportunity to (a) have a ventures fund and learn that way, and (b) to set up the Unilever foundry which we did three years ago. A lot of people talk right now about startups but we started this three years ago. I worked with a lot startups and learnt and that's the opportunity you get from scale to be able to do all that. Having said that I think anyone can buy wisely. Maybe we get a little bit more attention from WPP because we're a rather large customer but you can buy wisely.

JC: That was the point I meant about scale as well and the fact that you have so many ad dollars to spend actually you have leverage. Isn't that the point, when you are dealing with these third parties?

KW: Yes. You can still spend money badly whether you're rich or poor. One could argue actually if you're poor you even more careful with your money. I like to be rather poor with a big budget so we are quite challenging with how we engage around media because you can only spend your dollar once so spend it very well.

ON SUSTAINABILITY

JC: I want to talk about sustainability because when you think of Unilever you think sustainability. How do you take that sustainability theme and apply it when you're spending your marketing budget and I guess this takes us back to the third party relationships like WPP, do you scrutinize them and the relationship you have with them for sustainability too?

KW: So when we look at our sustainability platform environmental or social we look at our whole value chain. So you'll hear a lot of people talking about, businesses talking about, you know, we've decreased water by 60 percent or electricity by 20 percent or whatever, but what they're usually talking about is their manufacturing and their offices. But if you look at a business like Unilever, in fact if you look at many businesses, the actual value chain from beginning to end creates a very different picture. So that means all suppliers. So that means that we have said that we want to make all our agriculture raw materials sustainable by 2020 whether that is tea or whatever. But it also means that suppliers as far as advertising as well, so you won't be surprised I have sat down with all the agencies and spoken to them about their actual commitment to sustainability, what sort of people work they are working with etc. So we've taken it across our supplier base because our belief is we can only have a truly sustainable business if we work with people who are committed to sustainability as well.

JC: Do you think this is an area of improvement?

CC: Yeah, I think the trouble is it's a real black hole of issues, you know, you could be any large organization and be accused of hypocrisy in all sorts of ways. It's very hard to make everything transparent and sustainable.

INDUSTRY TRENDS

JC: I want to pick up on some of the advertising themes for 2016 I found a number of them. App indexing, video advertising - we've touched a bit on that- digital assistants, virtual reality and the internet of things so I'm going to pick a couple if you guys want to jump around and move on you can but what about the Internet of Things because for you with such a huge focus on home care brands. How are you combining these two things and adapting for the growth in the internet of things?

KW: I think what's really exciting about this is, right now, virtually all of the data we're talking about, all the connections we're talking about go through a human being. So something happens and it goes out the other end, that's what we are measuring. Of course the Internet of Things actually means that you know with all these connected devices -soon to be a quarter of a billion of them out there- talking to each other. We're going to have a whole different type of data set out there. And what's interesting for someone like ourselves is, you look at a car, look at a fridge, you know what does a car do. Cars drive past supermarkets. Fridges have our products in them. You can soon see that there could be a sort of, a you know, a real shopping list that's going from the fridge into your car and as you are driving by a supermarket it says "Do you know that you know Chunky Monkey is buy one get one free" etc. So you can see very quickly how the internet of things could give real opportunities to marketers to again in a utility way not in a nuisance way but in a utility way to help people simplify their lives. Our lives are getting really, really complex.

Weren't we promised that technology was going to simplify our lives. But technology is making it more complex and so I think again the fact that brands simplify, you know you go and shop in a sort of a medium sized supermarket. There are 30,000 items. You go and shop in that without brands it would take you a day. But you spend literally 10 seconds down an aisle and you pick up your Marmite and your Coleman's and your Knorr or whatever and you do your shopping really quickly because you know from that brand you've got a given value, you've got a given quality, you've had it before that's where you want to etc. And I think in this confusing world, brands are going to come in and help simplify again and it's a huge opportunity and the Internet of Things at one stage is going to give us a lot more data and confusion but also I think for brands, is going to help brands get much better connection and relevance in the modern world.

JC: Quick line on Virtual reality here?

KW: So we're already shooting for virtual reality on a lot of our brands especially the back stories etc.. Not that consumers yet have it but as time goes on as and when consumers have this at scale you're going to want some of this back footage. So we're very much seeing virtual reality as a big, big opportunity. And I think brands are going to be very much there.

SOCIAL MEDIA/PURPOSE:

KW: One thing we haven't talked about which I think is another big thing about social media: Social media and social purpose. In social media we've got much more opportunity to talk about our brands and there are only so many times you can say Persil washes whiter, Persil washes whiter even if it does. But now we start talking about Persil and dirt is good and Child Development and saying actually you know children are spending too much time on their devices they should go out and get dirty. We just recently launched this, thought about that actually maximum security prisoners in the U.S. have more outdoor time than school kids do now. And if you think about that it's our kids aren't getting out there and experiencing life and you know getting dirty. And, of course, don't worry if you get dirty because we can get it right with Persil, but that is creating a whole level of purpose and engagement.

I think we're now in a phase potentially of marketing FOR people and that journey I think will make marketing mobile again. I think marketing started off by serving people. I think in the 80s it got a little bit lost with selling more stuff. And I think what you're seeing now – and social media is helping this –is to bring back brands that have real resonance. And the brands that have real resonance will win. They'll win with the millennials we were talking about earlier. You won't be surprised if you go on somewhere like Vice - which is obviously very much targeted at millennials – you see Unilever brands very much present there. Why? Because we really understand the power of millennials but our brands have stories to tell to millennials and the reason they have that is because we have brands with purpose brands with meaning. And I think that's a really exciting new chapter for marketing and I'm going to see a lot more of that.