China Food

Unilever brings “wolf” into the house

Unilever, which operates many well-known brands in China, such as heluxue, Carrefour and dove, is standing at the “crossroads of destiny” – a new force that can affect its future direction has joined the lineup at the helm of the company.

Yesterday, Unilever announced that Nelson Peltz, a radical investor, had joined the board of directors. The snack generation noticed that once the news was released, the stock price of the FMCG giant soared. In March this year, Unilever’s share price once fell to the lowest point in nearly five years, and yesterday’s closing price hit a new high since then.

This latest appointment also triggered a lot of speculation and discussion about the future of Unilever.

According to the Daily Mail reported today, analysts believe that Peltz may “help to reverse the fate of Unilever”. He may push Unilever to sell its troubled brands to focus on faster growing businesses and increase its attention to industries with higher profits. “Investors hope that he can use his position on the board of directors to take the lead in turning the situation around, just as he has helped other consumer goods giants including P & G to carry out reforms.” Reported that.

The Wall Street Journal commented today that investors “may have high expectations” for Peltz to replicate his previous success story. “Unilever and P & G faced similar problems four years ago, and now its board of directors also has the same radical investors. But the times have moved forward.”. However, the comments also believe that the emergence of radical investors may speed up Unilever’s disposal of less attractive brands, and the possibility of stripping the food and beverage business has been mentioned again.

What does this “big man” mean to Unilever and what variables will it bring? Tonight, the snack generation will bring you to pay attention.

Past “achievements”

Let’s take a look at the sacred nature of this radical investor who stirred the Jianghu by his own efforts.

According to foreign media reports, Peltz, who was born in New York in 1942, is now one of the richest people in the United States and the father-in-law of Brooklyn Beckham. Last month, Peltz made headlines outside the financial edition because his daughter Nicola Peltz and David Beckham’s son Brooklyn Beckham held a grand wedding in Peltz’s 27 bedroom mansion in Florida.

Of course, for Unilever, his most important identity is the CEO and founding partner of trian fund management, an investment management company. According to the official report, trian holds about 1.5% of the shares of Unilever, which also enables Peltz to enter the board of directors of Unilever and become a non-executive director and a member of the Remuneration Committee. In addition, he has served on the boards of several major global consumer goods companies, including P & G, H.J. Heinz and Yizi international.  

The above appointment of Unilever is expected to take effect on July 20, 2022.

“We are very pleased to welcome Nelson to join the board of Unilever. We have had extensive and constructive discussions with him and trian’s team. In the process of continuing to promote our business performance, we believe Nelson’s experience in the global consumer goods industry will bring value to Unilever. We look forward to working closely with each other to create long-term sustainable value for our shareholders and broader stakeholders.” Nils Andersen, chairman of Unilever’s board of directors, said in the announcement issued yesterday.

Peltz expressed his pleasure to join the board of Unilever. “We believe that with its strong consumer brand portfolio and business footprint, this is a company with great potential. Trian has made a lot of investment in Unilever. We look forward to working with management and the board to help promote Unilever’s strategy, operations, sustainability and shareholder value for the benefit of all stakeholders.” He said.

Almost everyone is waiting for this radical investor to “open fire” at Unilever – because from the past experience, Peltz is famous for promoting the strategic and governance changes of the companies he participates in the management.

Nelson Peltz, a radical investor of Unilever (photo source: Bloomberg)

Xiaoshidai noticed that the daily mail pointed out today that after taking a stake in P & G and joining its board of directors, Peltz had taken the lead in carrying out comprehensive reform. He criticized P & G’s aging brand and the “suffocating bureaucracy” that led to poor shareholder returns. Since his investment, the company’s share price has soared.

Today, the Wall Street Journal mentioned that Peltz had called for P & G to be divided into three sectors and recruited senior executives from outside the company. He also pushed P & G to reduce its staff and change the compensation method of senior executives. At that time, Peltz had many conflicts with David Taylor, then the CEO of P & G.

Finally, some of Peltz’s ideas were implemented. For example, P & G carried out a comprehensive reform of its management. The company has changed the previous management structure in which some executives were responsible for key brands and others were responsible for regional businesses, because this setting would make many managers need to report to multiple leaders at the same time.

At the same time, Taylor believes that some of Peltz’s ideas are wrong, including the latter’s view that the company should stay away from big brands such as tide and Pampers and support niche brands that are attractive to young people. Therefore, although P & G has made a series of smaller acquisitions, the company still focuses on its largest brand as always. It is reported that during the epidemic period, with consumers’ favor for reliable brands, the demand for most big brands surged.

Copy “successful”?

So, will Perez repeat the “P & G style operation” at Unilever?

Xiaoshidai noticed that Reuters pointed out today that according to the people who work with Peltz, what distinguishes him is his “intensity” of promoting change and his ability to keep the company’s executives alert through in-depth research. “He was well informed and we were surprised again and again – he absolutely knew what had happened.” A former Heinz executive said.

The financial times commented that after the radical investor Peltz entered the board of directors, Unilever “may have its business dissolved, split and the management left”. He also pointed out that the most radical call here is to force the sale or spin off Unilever’s food and beverage department.

The snack agent introduced that Unilever’s food and beverage department, including Hellmann’s mayonnaise, Ben & Jerry’s and Monroe ice cream, accounted for about 40% of the group’s total sales. In 2021, the revenue of this sector was 19.9 billion euros (about 152.494 billion yuan, equivalent to 7.663 yuan at the average exchange rate in 2021), and the basic sales increased by 5.6%.

Unilever’s food brands (photo source: Guardian)

“That will be a repeat of trian’s script at Cadbury (a radical hedge fund managed by Peltz). Cadbury split its beverage business at that time, providing an opportunity for Kraft to launch a hostile acquisition.” The Financial Times said. According to the data, trian was responsible for dividing Cadbury’s business into two and divesting its beverage business Schweppes. Later, Cadbury was acquired by Kraft, an American giant.

“If Peltz lobbies in this direction, he may have a conflict with Alan jope, CEO of Unilever. The latter’s rigid answer to any split is’ no plan at present ‘.” Reported that.

“Is Joan road’s job safe? Simply answer, No. Unilever’s wrong judgment on the consumer health department of GSK (hereinafter referred to as GSK) has damaged some shareholders’ little goodwill towards him. They are complaining that the communication work (between Joan road and shareholders) is very poor.” The report also pointed out that, despite this, Qiao Anlu may still win some time for himself.

Qiao Anlu, CEO of Unilever (information picture)

The financial times also said that referring to the example of P & G, analysts predicted that Unilever would usher in gradual change rather than a complete revolution. The report quoted the analysis of Morgan Stanley as saying that Unilever has some strong brands in relatively attractive categories, and refocusing its resources on areas with competitive advantages can release growth.

“Although high-end beauty has been a key area of management’s attention since 2015, its percentage in the group’s sales is still in the low single digits. We expect investors to review Unilever’s capital allocation strategy more carefully after abandoning the acquisition of GSK consumer health for £ 50billion earlier this year.” Morgan Stanley said.

“Our view on Unilever’s product portfolio is not as negative as that of some investors. According to Euromonitor data, we estimate that Unilever has increased by about 4-4.5% in the end market in the past five years… Nevertheless, we believe that prudent portfolio management can further release the growth space (just like Nestle’s situation since 2017) 。 It is worth noting that Unilever expressed in January that it hoped to substantially expand its business in the fields of health, beauty and hygiene. ” Morgan Stanley said.

The Daily Mail also pointed out today that after years of stock price decline and a series of setbacks, analysts said that this radical investor may use his position to promote the restructuring of the consumer goods business, “and may even ask to split Unilever”.

Other investors are also calling for business restructuring. According to the guardian, last month, AllianceBernstein, an asset management company, called for a complete restructuring. Bruno Monteyne, an analyst at AllianceBernstein, said that Unilever should be split into smaller and “more cohesive” businesses, such as home care, personal care, beauty and food.

In fact, Unilever has started a series of major transformations.

As introduced by the snack representative, in January this year, Unilever announced a new organizational structure. The newly restructured structure includes five business departments: beauty and health, personal care, home care, nutrition and ice cream. At the same time, Unilever appointed business presidents for each department. Each department is fully responsible for its global strategy, growth and profitability.

As for the adjustment of product portfolio, Qiao Anlu said in February this year, “we have many opportunities to pursue (growth) in our existing business and continue to increase the scale of high-end beauty and health products from 1billion euros to more than 3billion euros through reinforcement acquisition.”

According to the data of Unilever’s performance meeting searched by snack generation, since 2017, Unilever has spent 16billion euros (about 115.757 billion yuan) on 29 acquisitions. Among them, functional nutrition is the most expensive sector, accounting for 43%. During the period, Unilever also made 12 sales, with a total of 11billion euros (about 79.583 billion yuan) from tea and spread sauce.

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