Unilever Lathers Up

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Instead, these functions have been largely centralized, eliminating duplication and allowing for faster decision-making and global economies of scale.

The Transformation Continues

Equally important, emerging markets, where Unilever historically has been strong, were made a higher priority. To ensure products meet the needs of local consumers around the world, nearly one-third of the company's home and personal products brand development resources now are based in the developing world.

The changes are paying off. Unilever posted its best annual results in five years on Feb. 7, with sales up 5.5%, to $15 billion, and net profits of nearly $8 billion. "The transformation of Unilever continues apace," Cescau says. Unilever's London-traded shares are up 12% since a year ago.

What's more, developing markets now account for nearly 45% of revenues, up from 38% three years ago. "Developing and emerging markets, which are expected to grow at 10% per year, will account for more than 50% of sales by the end of 2008," predicts Jan Meijer, an analyst at Amsterdam brokerage Theodoor Gilissen.

A Better Binder

Cescau's new approach has made it possible for Unilever to roll out small regional brands such as Clear quickly in high-growth markets. The company put more resources behind the product and tweaked the formulation with input from labs around the world. Although Clear contains zinc pyrithione, the same active ingredient as Head & Shoulders, Unilever claims its shampoo is more effective thanks to a patented technology that helps the zinc bind better to the scalp.

The biggest innovation, however, may be in marketing. Unilever has set up hair-care centers in malls from Beijing to Moscow where shoppers can pop in and get their scalp assessed using an "i-scope"—a small camera with a powerful microscope that's hooked up to a computer. "Even people who think they don't have dandruff are shocked to discover they actually do," says Unilever's Won. "This is our most successful strategy so far, because seeing is believing."

Aiming to keep the brand's image stylish and aspirational, Unilever also has relied on good old-fashioned celebrity endorsements. Korean pop star and actor Rain hawks the brand across Asia, and his Clear ad is one of the more popular on YouTube (GOOG), with nearly 25,000 downloads.

Selling Single-Use Sizes

To reinforce the upscale image, Unilever took the risky step of pricing Clear at a 10% premium to Head & Shoulders, which is already the most expensive mass market shampoo in most emerging markets. So far, the strategy is working: Not only has Unilever avoided a price war with P&G, but by grabbing the top of the market, it has given the shampoo a certain cachet.

That doesn't mean Unilever is targeting only the wealthy, though. It offers the shampoo in individual sachet sizes as well as in larger bottles, a strategy it successfully deployed in India several years ago. "We sell to both the very rich and the very poor," Cescau says. And soon that may include consumers in the U.S. and Europe.

Capell is a senior writer in BusinessWeek's London bureau .