Top plant tipped to escape shake-up

One factory in the Wellington suburb of Petone is insignificant in the global ambitions of Unilever, the world's largest maker of consumer goods. But it is very important to New Zealand.

The Unilever plant makes all the laundry detergents, toothpaste and soap the group sells in Australasia. Exports from that one Wellington factory are worth about two-thirds of the value of New Zealand's entire wine exports.

Unilever imports almost all the raw materials for those consumer products but buys most of its packaging in New Zealand. It demands and gets world class products and service from its local suppliers. The end result is manufactured exports which contribute a useful chunk to our balance of trade.

Back in 1993, Petone won the mandate from its Anglo-Dutch parent to be the cost-effective regional manufacturer for those household items. It has delivered so well it is likely to survive the 5 billion euro ($10 billion) global restructuring perhaps the largest ever attempted by a company which Unilever announced yesterday.

If Unilever can make New Zealand work well for it as a regional manufacturing base, surely other multinationals could too? Perhaps, but it's not easy. Consider a quirk of Unilever's New Zealand operation. It imports raw materials to make products in which we have no natural advantage. In contrast, New Zealand offers abundant agricultural raw materials but Unilever makes no food here. It has tried, with indifferent results.

One reason is its technological history. Its roots were in oils and fats to make soaps and later margarine. Its food technology has moved on a pace since. You might think you're eating a simple ice cream or drinking a plain cup of instant soup but both are technologically very sophisticated -- and profitable with margins in the 30 per cent range. Moreover, sales are booming. Unilever estimates the world market for instant single serve soups will grow 14-fold to $US3.6 billion over the next five years.

New Zealand food manufacturers can only dream of such sales growth and high margins and the technology and global marketing muscle to drive them. And it's a scramble to keep on top of those trends, as Unilever's global restructuring shows.

A few New Zealand companies perform to those international standards. Heinz-Wattie is one example thanks to being part of a global business. Arguably the dairy industry could also be that good if it could ever get its mega co-op together. But even then it would be weaker in technology, brands and global marketing than global players such as Nestle.

So if there is a lesson from Petone it is a rather unsatisfactory one: with the right stimulus and support (plus a dash of serendipity), manufacturers here can achieve at least regional scale and success. But exactly who and how is rather elusive.