The new boss of Unilever said the consumer goods group would stop “force-fitting” social justice messaging onto brands as he unveiled plans for a turnaround to improve performance.
Hein Schumacher said giving certain brands a social or environmental purpose “simply won’t be relevant or it will be an unwelcome distraction” as the maker of Marmite spread and Dove soap reported a 3.8 per cent fall in the third quarter turnover to €15.2 billion and sales volumes dropped by 0.6 per cent.
He took over from Alan Jope in July who wanted a social purpose to the company’s brands. Jope had wanted to sell brands that “stand for something more important than just making your hair shiny, your skin soft, your clothes whiter or your food tastier”.
It was a stance that led in a backlash from investors. Terry Smith, the fund manager, last year criticised the company for “ludicrous” virtue-signalling on everything from sustainability to Knorr stock cubes. He claimed the company had become “obsessed with publicly displaying sustainability credentials” and had “clearly lost the plot”.
Schumacher, a restructuring specialist who joined FrieslandCampina, the Dutch dairy co-operative, set out his strategy to deliver faster growth and productivity, as well as an overhaul of the group’s leadership team. “The quality of our growth, productivity and returns have all underdelivered,” he said.
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He said he would invest in what he called its “power” brands — 30 of its 400-plus labels that represent 70 per cent of Unilever’s turnover. They comprise 14 brands with €1 billion or more in turnover including the likes of Dove,Sure and Persil, complemented by another 16 that Unilever said had the potential to reach that figure.
Schumacher, 52, said that rather than carrying out any “major or transformational” acquisitions, he believed the “best way is to grow the business we own”.
Unilever has come under attack from investors over past acquisitions, including a failed bid for the consumer health division of GSK and Pfizer in 2021, during which Nelson Peltz, the American activist investor, joined the board and agitated for change.
Schumacher acknowledged that some acquisitions, including that of Dollar Shave Club, had been unsuccessful. Unilever announced the sale of the men’s grooming brand it acquired for $1 billion in 2016 for an undisclosed sum. The buyer is Nexus Capital Management, an American private equity firm. Unilever will retain a minority stake.
The Unilever chief said the company would “continue to prune the portfolio where we see fit … and that might come with some disposals.”
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Ice cream is one category that has struggled recently. Last summer, Unilever moved ice cream into its own division during a company-wide restructuring that split brands into five main groups: beauty and wellbeing; personal care; homecare; nutrition; and ice cream. This prompted speculation over the future of its ice cream business, but Schumacher said that Magnum, as well as Cornetto and Ben & Jerry’s, were on his list of “power brands” and that “there is a further opportunity to improve on ice cream”.
The company could do with less heat surrounding ice cream. When Ben & Jerry’s, its socially conscious American subsidiary, said in 2021 that it would no longer sell its products in occupied Palestinian territories, there was anger in Israel. There was more discontent when Unilever struck a deal to sell the ice cream unit’s operation in Israel — to the dismay of Ben Cohen and Jerry Greenfield, Ben & Jerry’s founders, who claimed the Anglo-Dutch company had breached the terms of its takeover in 2000.
When asked yesterday why the Ben & Jerry’s founders had not said anything about the present conflict in Gaza, Schumacher said: “Ben & Jerry’s is an important brand for us in our ice cream portfolio. They have been vocal before because of their social mission.
“On that conflict I have no comment at the moment. It’s not a topic of discussion.”
Unilever announced an overhaul of its leadership, saying that a “renewed team” would lead change at the company. It named Fernando Fernández, at present the president of its beauty and wellbeing business, as chief financial officer. He replaces Graeme Pitkethly, who will retire on January 1. Hanneke Faber and Matt Close, Unilever’s presidents of the nutrition and ice cream groups, have stepped down and have been replaced by internal candidates.
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The new team has inherited a company whose sluggish sales and share price have lagged peers such as Nestlé and Procter & Gamble. According to Terry Smith, a leading shareholder and veteran City fund manager, the company’s underperformance is due in part to virtue-signalling on everything from sustainability to Knorr stock cubes “at the expense of focusing on the fundamentals”.
When asked if the group had taken Smith’s comment into consideration, Schumacher said: “Data shows that brands [that focus on social and environmental purpose] do perform better. However, I also believe [it] is not something we should force-fit on every brand.”
The long-awaited plan failed to impress investors. Shares in the business were down 113½p, or 2.8 per cent, at £39 last night.
Tineke Frikkee, a portfolio manager at Waverton Investment Management, said the new strategy had been “well-presented” but was “overall underwhelming, investing and rewarding for higher growth and no significant portfolio restructuring. This sounds similar to previous chief executives and will take time to be delivered.”
Analysts at Royal Bank of Canada said the action plan “hasn’t blown our socks off, but it seems sensible, as well as suitably critical of Unilever’s past performance, which gives us hope.”
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Investec, the City broker, which has a “buy” rating on Unilever, described the new chief executive’s plan as a “sensible, if unexciting, strategy”.
