‘Virtue signalling’ Unilever goes back to basics
Under its outgoing boss Alan Jope, critics claimed Unilever had forgotten its real purpose: to make money.
For the past four years, the consumer goods giant has been battling to find a social purpose for every one of its 400 brands – even Hellmann’s mayonnaise and Marmite.
One exasperated fund manager complained Unilever had “lost the plot”, with the malaise attracting billionaire Nelson Peltz, the Wall Street activist who has taken a sizeable stake in the FTSE 100 giant and is demanding improvements.
Now, it seems the Unilever board concurs too. On Monday, the company announced that its next chief executive will be Hein Schumacher, a Dutchman whose background was mostly in finance before he ran dairy multinational Royal FrieslandCampina. He will start in July.
The appointment of a relatively unknown figure to lead the £103bn business left analysts surprised.
But hiring the unflashy 51-year-old may signal a back-to-basics approach at Unilever following years of lacklustre results.
The move was welcomed immediately by Peltz, 80, who knows Schumacher from the latter’s time climbing the corporate ladder at Heinz.
“I first met Hein when I served as a director at the HJ Heinz from 2006 to 2013 and was impressed by his leadership skills and business acumen,” said Peltz, in a statement issued rapidly on Monday morning.
“Like all of my fellow Unilever directors, I strongly support Hein as our new chief executive and look forward to working closely with him.”
At Heinz, Schumacher held an assortment of roles from 2003 to 2014 in Asia, the United States and Europe, skewing heavily towards finance. He also worked at Unilever previously, as a finance manager in Germany and the Netherlands from 1997 and 2001.
Little else is known about Schumacher, who appears to have kept a relatively low profile over the years – except to pen a pro-EU opinion piece for Dutch and German newspapers in 2019, calling for more joined-up foreign policy.
“He’s not exactly what you would call a box office candidate,” says one analyst.
But Martin Deboo, an analyst at Jefferies, says Schumacher brings “frontline experience at major blue-chip public companies and must presumably have made a favourable and immediate impression on the Unilever board”, on which he has served since October.
The focus on finance throughout his CV may also offer a clue of where his efforts will be targeted at Unilever. A statement from the company’s chairman, Nils Andersen, praised Schumacher’s “operational effectiveness” and “excellent track record of delivery”.
“I will be very focused on working with the Unilever team to deliver a step-up in business performance, as we serve the billions of people around the world who use its products every day,” Schumacher said.
The shake-up comes as Unilever is still licking its wounds from a string of foul-ups under Jope.
In something of an annus horribilis, 2022 saw the company make an abortive £50bn bid for GSK’s consumer business; issue a profit warning over shrinking profit margins; and become embroiled in a high-profile bust-up with one of its own subsidiaries, Ben & Jerry’s.
A share buyback scheme also seems to have done little for the stock price, which is languishing below where it was when Jope took charge in January 2019, underperforming the FTSE 100.
His tenure has been controversial, with critics charging that “virtue signalling” came at the expense of more mundane but vital fundamentals such as sales and profits.
Jope’s fate was then sealed by the failed bid for GlaxoSmithKline consumer unit Haleon a year ago, which triggered a torrent of criticism from investors and raised questions about Unilever’s future direction.
It was not long after this that Peltz – a well-known activist who has successfully agitated for change at other consumer goods giants – emerged as a major shareholder and won a seat on Unilever’s board.
The billionaire, whose daughter Nicola is married to Brooklyn Beckham, has made his presence felt since then, playing a role in finding a new chief executive and helping to defuse a row over the sale of Ben & Jerry’s ice cream in Israel by brokering a disposal of the local business unit.
The eventual choice of Schumacher followed an “extensive, global search”, according to chairman Andersen.
A biography released by Unilever highlighted Schumacher’s “transformation” – business jargon for cost-cutting – at Royal FrieslandCampina and his success overhauling its portfolio and structure. The company operates in 40 countries and has a turnover of just €11bn per year, making his latest job a significant step up.
And the married father-of-three is likely to face difficult choices from the get-go, says Jefferies’ Deboo.
Besides going down terribly with shareholders, Jope’s bid for GSK’s consumer business has highlighted growing confusion about what kind of company Unilever wants to be – and prompted fresh calls for a potential split of the food and non-food businesses.
“Our thesis on Unilever is that the business should split,” says Deboo.
“I strongly suspect Nelson Peltz is going to push for that, so Schumacher is going to have to take a position quite early on.”
Jeffries argues the two businesses would be given much higher values by investors separately than when combined under Unilever.
Moreover, Peltz’s record on agitating for change is formidable.
His hedge fund, Trian Fund Management, has successfully won a seat at the table at some of the biggest consumer goods companies on the planet, including Heinz, Mondelez and Procter & Gamble.
Whatever Schumacher decides, investors are impatient for better results following years of lacklustre growth under both Jope and former chief executive Paul Polman.
Sales grew by 17.8pc in the third quarter of 2022, compared to a year earlier but much of this was because of rising prices, which the company increased by 12.5pc. Volumes – the number of products actually sold – dipped 1.6pc.
This is just one reason why Jope’s focus on social purpose for brands like Hellmann’s, which has featured in a PR campaign about reducing food waste, has left a sour taste.
“A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot,” wrote star fund manager Terry Smith in a 2021 letter to his clients.
Jefferies’ Deboo dismisses the idea that Unilever will drop its ethical and sustainable policies any time soon, but believes it may scale back the search for meaning in pantry items.
“We might see some change there but I don't think Unilever will step away from being overtly focused on purpose and sustainability. It’s wired into the company’s DNA and to an extent that is simply a reality of doing business in the modern age,” he adds.
Bernstein’s Monteyne, meanwhile, believes the change of chief executive may herald further overhauls at Unilever, including on the top floor.
“We would expect further material changes to the board and the C-level executives over the coming 12 months,” he adds.
After years of chin-stroking over the purpose of ice-cream, mayonnaise, tea and detergents, directors may soon be under pressure to explain their own purpose.