Unilever CEO Outlines Growth Strategy Amid Criticism, Pandemic Setbacks

Summary

Unilever’s recently appointed CEO, Dutch national aged 52, has unveiled strategies to reshape the multinational corporation, involving honing in on top-performing brands and trimming down the company’s vast workforce numbering 127,000. The decision to overhaul follows an amplified criticism against earlier business methods, including an undue weightage on sustainability initiatives and failure to regain market margins post-pandemic. As the consumer goods giant embarks on this new journey, questions on a potential spin-off for its food business weigh in the air. However, its primary focus remains on executing action plans for growth.

Examining Past Mistakes

The former chief executive, Alan Jope, faced criticism for expanding Unilever’s brand umbrella to around 400, creating a situation where management was unable to concentrate on the best-performing brands. Investors also attacked Unilever for not recovering losses post-pandemic and overemphasizing sustainability, often at performance’s cost.

Financial Dynamics

Critiques increased following Unilever’s quarterly earnings report, where the company came under scrutiny for not regaining lost market share quickly and allowing a drop in margins. Reports from January 2022 indicated investor Peltz’s interest in the corporation, acquiring a stake via Trian Partners investment fund and finally landing a board seat. According to March 2023 LSEG data, this fund possesses a 1.45% stake in Unilever.

Change of Leadership

Jope’s exit announcement came in September 2022, followed by the new CEO’s appointment the subsequent year. The newly appointed CEO, Schumacher, acknowledges that Peltz’s inclusion on the board was a result of Unilever’s unsatisfactory performance, considering it an opportunity to buy the shares due to its potential.

Aligning with Growth Strategy

Schumacher stresses Peltz’s investment strategy aligns with Unilever’s growth objectives, which involve innovations, better operating discipline, and investing more in its top 30 brands, contributing to more than 70% of sales. Peltz has expressed approval for Unilever’s division of business lines by categories instead of regions, reflecting Trian’s influence over rival corporations like P&G. Currently, he is silent on the matter.

Unilever’s Future course

While investors have been suggesting a possible spin-off for Unilever’s food business, Schumacher emphasizes the current focus is on executing the growth action plan. However, he is not opposed to considering significant portfolio changes. Unilever recently commenced a€1.5 billion ($1.6 billion) share buyback after recording an increase in volume for the first time in ten quarters.

Performance-Based Changes

Schumacher, with his experience at HJ Heinz during Peltz’s merger with Kraft Foods (NASDAQ:), stresses on a performance-driven culture change, which might make part of the workforce redundant. Several leadership roles have undergone changes, with Esi Eggleston Bracey stepping in as the new head of growth and marketing officer.

Focusing on Top Brands

Bracey’s task involves a clear two-to-three-year roadmap for Unilever’s top brands. “We do not have it systematised as I would like it to be”, he added. Gradually addressing past challenges, Schumacher’s mode is now on progress and improvement, leaving his effectiveness as a CEO for history to judge.

PIP Penguin
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