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Unilever: Revolution not evolution

09/02/2023

UNILEVER, the maker of Ben & Jerry’s ice cream and Marmite, has announced its full year results:

  • Underlying sales growth of 9% with prices increasing by 11.3% and volumes declining 2.1%.
  • Underlying operating profit broadly flat at €9.7 billion with profit margins declining as a result of cost pressures.
  • Unilever expects 2023 underlying sales growth to be at least in the upper half of the multi-year range of 3 – 5%, but with only a modest improvement in operating margins due to continued cost pressures.
  • New CEO, Hein Schumacher due to take the reins on 1 July 2023.

Charlie Huggins, Head of Equities at Wealth Club, commented:

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“A solid end to a tumultuous three years for departing CEO Alan Jope. All eyes now turn to successor, Hein Schumacher’s plans for the under-performing consumer juggernaut.

Shareholders will be hoping for revolution not evolution. The fact Unilever’s Board has opted for an external hire suggests they are likely to get their wish.

The situation facing Schumacher is a bit like an experienced manager who takes over an under-performing football team flirting with the relegation zone, when it should be contending for European places.

There is little wrong with Unilever on the surface. It has good brands and a great footprint in emerging markets. The problem has been execution and getting the best out of the assets it owns.

Several problems could probably be solved by stopping doing things, rather than seeking to do more. Stop acquiring, stop shackling employees with bureaucracy, stop making empty promises and stop the corporate gobbledygook. Instead, focus on the basics, simplify, and inject some much-needed dynamism.

Easier said than done of course, especially for a business Unilever’s size. But there is a potential solution to that problem – disposals. The new CEO is bound to take a long hard look at Unilever’s portfolio. He may decide that over 400 brands is too many, especially since 13 account for about half of total sales.

At the moment it’s all speculation. Schumacher hasn’t even started, let alone had chance to get his hands on the steering wheel. But rarely has a new leader been so eagerly anticipated by shareholders, which tells you Unilever has been more Fiat than Ferrari in recent years.”              

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