One of Unilever’s biggest shareholders has said the group “makes no sense” for its beauty, personal care and home care sector to maintain its food business along with its beauty, personal care and home care sector, adding to the scrutiny of the SOAP conglomerate from the margarine that drove its CEO this week.
David Samra, a partner at Artisan Capital, the top 10 shareholder of the FTSE 100 group, said Unilever should consider selling its 13.4 billion euro revenue food business if it creates value to shareholders following years of small sales to boost the performance of the vast group.
“The (department) has to keep an eye on it over and over again because it makes no sense to have food or other products in the same company and it doesn’t make sense for the food to get a low multiple for you,” Samra told the Financial Times. “If mathematics shows us that we get more value (selling), they should do that.”
The future of the food business will become one of the issues with the trays of Fernando Fernandez, known by his former colleagues as “human tornados.” He was set up as CEO this week following the sudden removal of Heinschumacher in a role for over 18 months.
The group has pursued a list of ice cream divisions and under Schumacher has pledged to sell food brands up to £1 billion as part of a major turnaround plan aimed at focusing on higher margin areas such as beauty. Over the past decade, they have sold big chunks of their food business, including spreads and tea.
Schumacher, who headed the Dutch dairy giant Friesland Campina and worked at Kraftheinz for over a decade, ruled out selling the entire food business last year. Shareholders said the change in with Fernandez, former head of Unilever’s beauty division, has strengthened the company’s pivot to beauty and home care, reviving the persistent question of whether Unilever should abandon food.
“Looking down their focus is part of this strategic plan and it will continue,” Samra said. “What is the cost to unlock? That’s the math on which the board is running.”
If the board “started with blank paper… They wouldn’t have food there,” said Sue Nofke, UK equity director for Top 15 Unilever shareholder Schroeders. However, she added that the food “is relatively small in the post of Demarger ice cream,” and that the rest of the unit is important for emerging market Unilever.
Unilever slims down with food
We sell food businesses such as weight loss brand Slimfast, US pasta sauce brands Ragu & Bertolli and Meat Snacks Peperami.
Complete your spread business sales using brands like Flora, Country Crock and more. I can’t believe it’s not butter to private equity company KKR.
We sell business alsa for baking and desserts.
Complete the sale of the tea business to CVC Capital Partners, a private equity company that includes brands such as PG Tips and Lipton.
We will begin selling small and local food brands, including Dutch packaged food brands UNOX and Zwan.
The question of whether to sell the entire food sector was debatable. Unilever had previously explored selling and funding failed bids for GSK’s consumer health unit, now known as Haleon.
However, shareholders said the costs of unlocking the department’s vast supply chain from other members of the group would be a deterrent to take it away. Investors said the board is supporting leadership change and strategic direction.
Artisan Capital, who led a successful activist campaign at French consumer group Danone and called for the disbandment of German conglomerate Bayer, said it was “100% behind” the chairman, not an Unilever activist.
Bankers and analysts have long speculated that Unilever could pursue a fragmented consumer health industry acquisition.
However, in an appeal to investors this week, Meakins said the company will not embark on any major deals in the near future. Nofke told the FT that the chairman had told him there were no major M&A plans.
The board’s decision to remove Schumacher, which people familiar with the issue said were unanimous, has put the spotlight on Meakkins and is willing to advance the Unilever turnaround.
Schumacher, who was in the US for a shareholders meeting on Tuesday, was forced to cancel his appointment.
One former Unilever executive, Meakins, chairman of the FTSE 100 Company Compass Group and former chief of former architectural products group Wolseley, said it was “as hard as a nail.”
“People are underestimating Ian Meekins at the expense. He is the tough old boots chairman,” said a consultant who works with the company, adding that Meekins and Fernandez have a very close relationship. “He never chose Hein, but he chose Fernando, which is that Ian is betting on the CEO he chose.”
Unilever declined to comment.
Analysts and people close to the company have identified the November Unilever capital market event as the day that decided to rise to Fernandez’s top job. Argentina has worked for almost 40 years in Latin America, Asia and Unilever, which is in charge. He has surpassed his boss since becoming CFO last January, people said.
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Veteran fund manager and shareholder Terry Smith told investors this week he has nothing to do with Schumacher, who is “doing a great job.” But he said Fernandez “really stood out” and was “basically dynamite.”
Shareholders and people close to the company said, unexpectedly, that the board’s sudden expulsion of Schumacher and his decisive bet on Fernandez showed a more ruthless approach from the group.
“We believe that there is a significant backlash from investors in UK companies as being a bit boring, unshiny and lacking in sharp elbows.
“And here is a company doing it for itself.”
