It was an important question in his very first interview as CEO. How would he, Alan Jope, make Unilever grow faster? Because Unilever was in good shape in itself, but turnover growth lagged behind somewhat. The new boss had to change that.
As befits a newly appointed CEO, Jope beamed during that first interview in 2019, at the Financial Times, all confidence. He would bet even more on personal care products. There are higher margins on these than on the foodstuffs that Unilever also sells (in the Netherlands, for example: Calvé and Unox). And then everything would be fine. Yes, he did feel “urgency.” But: “I don’t feel any pressure from outside.”
How different it is now, three years later. Scotsman Alan Jope (pronounced Djoop) is under a lot of pressure from shareholders to show progress. There has been some grumbling in recent months, but since the failed takeover of GSK’s painkillers and toothpastes three weeks ago, discontent has exploded.
While Unilever, a British company with roots in Rotterdam, hoped to impress with this €60 billion mega deal, the exact opposite happened. Investors were shocked. What did Unilever suddenly have to do with medicines? The stock price fell sharply. The prevailing sentiment: what is Unilever up to?
Next week, all eyes will be on Unilever again: Thursday the multinational (50.7 billion euros turnover in 2020, 149,000 employees) will present the annual figures for the past year. An important moment for shareholders and for Jope himself. Then he will have to respond extensively to the GSK debacle and try to convince the shareholders that he can turn the tide.
What are the biggest problems that Jope needs to solve?
Quieter than Paul Polman
If anyone knows Unilever well, it is Alan Jope (59). He is a lifer: Unilever is his first and only employer.
He started out in 1985 as a marketing trainee and then traveled all over the world. He has led in Asia, Russia, Africa and the Middle East. Promotion followed in 2014 – Jope became boss of the important ‘personal care’ division, with brands such as Ax, Dove and Rexona. The biggest promotion he could get followed in 2019: he succeeded the Dutchman Paul Polman as chief executive.
In terms of style, Jope is in his spare time motorcycling and football enthusiast, another type of leader. Polman, who put sustainability prominently on the map within Unilever, liked to be on stage and shared his vision at the United Nations in Davos. “He was much more evangelical, a prophet,” says analyst Bruno Monteyne of investment bank Bernstein, which follows Unilever. “Alan Jope is a bit more of a man behind the scenes. Many investors thought that was positive.” Known for being friendly and humorous, Jope is also easier to get along with. “Polman was able to react very irritated to critical questions from analysts,” says Fernard de Boer, himself an analyst at investment bank Degroof Petercam. “Jope is calmer.”
Also read this interview with Paul Polman, in which he looks back on his time at Unilever: ‘I’m at the forefront, I make people uncomfortable’
In terms of content, however, the arrival of Jope did not bring about a radical change. The way in which the company was set up remained the same and Jope also embraced the sustainability story. The big difference is the result: during the ten years under Polman, the share price grew steadily. Since Jope took over, the stock has not moved much.
Currently, the share price is even lower than when it started. In the meantime, the prices of major competitors such as Nestlé and Procter & Gamble have risen sharply. Of course, this is not only due to Jope, he already inherited a moderately growing company – but he is now being held accountable for it.
Unilever’s Identity Problem
When Jope took office, it was clear that he had to do something with the motley collection of brands. Because what kind of company is Unilever anyway? It sells everything. Magnum ice creams, Zendium toothpaste, Knorr meal mixes and Cif cleaning agent. Jope has tried to choose more clearly: less food, more personal care and what Unilever calls ‘beauty’ and ‘hygiene’. That is where the growth opportunities lie, he believes. Jope also promised to sell ‘slow’ brands in exchange for new fast growers. Unilever sold the tea branch (Lipton, Pukka) and bought the American cosmetics brand Paula’s Choice.
Only: the growth failed to materialize. And Jope has not made really radical choices. Unilever is still ‘a conglomerate’, says analyst De Boer of Degroof Petercam, with a range of more than four hundred different brands. “I still see little cohesion.”
Shortly after the failed takeover of GSK, Jope came up with a hasty update of the strategy: Unilever also wants to expand further in ‘health’ – think of vitamins. And last week followed one more step: Unilever divides itself into new categories and 1,500 management jobs disappear. Most notably, the ice cream division has been set aside – making it easier to sell, although it’s unclear whether that’s the plan.
“The big question is,” says analyst Karel Zoete of stock trader Kepler Cheuvreux, “why would Unilever grow faster as a result? They have to come up with a good story with the annual figures. Critical shareholders will not be easily satisfied.”
Activist on the attack
As if Jope didn’t have enough trouble already, he ran into a problem shortly after the GSK flop. A notorious activist shareholder has taken a stake in Unilever, the . reported Financial Times and The Wall Street Journal. Trian was founded by 79-year-old billionaire Nelson Peltz.
The same Peltz got himself into Procter & Gamble (Ariel, Pampers, Gillette) in 2017, which he accused of “excessive costs and bureaucracy”, and where he won a commission. Another activist, Daniel Loeb of hedge fund Third Point, aimed his arrows at Nestlé . a year later (KitKat, Maggi, Nespresso), which he says has become “complacent” and “lethargic.” Whether it’s these activists’ faults is hard to say, but P&G and Nestlé are now known as success stories in their industry.
In any case, an activist shareholder on board is causing unrest. What do they want? Do they get support? What Peltz wants with Unilever is still a guess, but Jope will have to do something with it. Perhaps Peltz is demanding that Unilever kick out slower-growing food brands – or the entire food business. Or does he want, as you see that sometimes, to replace the company top.
An activist shareholder like Peltz will not have much patience, says Karel Zoete of Kepler Cheuvreux. “An activist does not say: we will look further in a year.”
A crisis of confidence
Ultimately, Unilever will have to deliver better results to satisfy shareholders, but in the shorter term it’s about regaining trust. This has become even more urgent after the failed takeover attempt. Because actually nobody seems to understand what motivated Unilever to put so much money down for GSK. Analyst Monteyne saw a rare unanimity among colleagues. “Really all analysts said: we cannot defend this.”
Hartwig Liersch, director of investments at pension fund PMT, says by telephone that the offer was a surprise because of the “lack of communication” about the company’s strategy. PMT is a major Dutch shareholder in Unilever. “Normally you first say what the strategy is, and then you go and do something.” Now the strategy, to expand in ‘health’, only came afterwards. The Dutch pension provider APG, also Unilever shareholder, wrote in response to the offer also to be “surprised.” “While we like positive surprises, it’s not clear to us if this is one.” APG has more confidence in growth through several small acquisitions.
What does not seem to be up for discussion: Unilever’s great attention to sustainability. Hartwig Liersch of PMT: „We would find it annoying if the pressure [op het bedrijf] leads to short-term policies. The most important thing for us is that the sustainability policy remains in place. We see long-term sustainability as a precondition for profitability, not a barrier.”
Last month, major British shareholder Fundsmith criticized Unilever’s ‘obsession’ with sustainability and what Alan Jope purpose – a higher goal than making money. But this should also be seen above all in the context of financial performance. Great to pay attention to sustainability, but the business must also move forward, is the thought.
The company culture is a point of attention, according to analyst Bruno Monteyne. “You can ask yourself: has Unilever been too happy with itself? Too much on it high fiven about sustainability? The frustration with Unilever is not because investors are against purpose, but too little is said about growth or relevance for consumers.”
For Alan Jope and the rest of the company’s top, it will be up or down in the near future. Will they get the growth back? It is clear, says analyst Karel Zoete, that some investors are running out of patience. “Muddle through a little, restructure a little and hope it works out, that’s not enough.”
A version of this article also appeared in NRC Handelsblad on 5 February 2022
A version of this article also appeared in NRC on the morning of February 5, 2022
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