Unilever chief executive Alan Jope has for the first time offered hope that the maker of Dove soaps and Magnum ice creams will next year escape a period of stagnant sales that has dogged one of the world’s largest consumer goods groups.
The 54-year-old Scot, who succeeded Paul Polman in January, faces pressure from shareholders to reverse four years of slowing sales growth as Unilever struggles with challenges ranging from millennials ditching well-established brands to the growing popularity of new trends such as veganism.
In his first interview since taking the top job at the £140bn company, Mr Jope signalled that the centre of gravity at the Anglo-Dutch group would shift further from food to the higher-margin beauty and personal care market.
“This year we’ve set the guidance in the 3 to 4 per cent range, and I would hope that next year we would start to edge that up,” Mr Jope said. “Whilst I’m working with a sense of urgency, I don’t feel a sense of pressure externally.”
The Unilever veteran, whose more than three decades at the company has included stints running its operations in India and China, is one of a crop of new leaders being handed the job of reviving a major consumer goods group. Kraft-Heinz, PepsiCo, Colgate-Palmolive have all overhauled their management recently in a bid to reignite growth. Annual sales growth has waned to just 2-3 per cent across much of the industry, down from the 6-8 per cent companies enjoyed a decade ago.
Analysts are expecting Unilever’s underlying sales growth to pick up to 3.4 per cent this year from 2.9 per cent in 2018.
Since 2015 Unilever has focused its acquisitions on skincare and cosmetics products, with the beauty and personal care division accounting for almost three quarters of the €11bn it has spent on 30 deals. Over the same period, the company has sold €8bn of assets, largely in slower-growing categories of food such as spreads and margarines.
“Going forward, it’s highly likely that we will buy a lot of stuff in beauty and personal care, without disposing much of anything,” he explained in an interview in Paris. “Whereas in food, we will buy some stuff, not as much, and continue to dispose of assets that are intrinsically slower growth.”
However, Mr Jope was clear that the elusive recovery in sales growth would not come from chasing the start-ups producing plant-based meats, such as Beyond Meat, that have dazzled on the stock market this year.
“Plant-based eating is a megatrend and so the most important thing is making sure vegan and vegetarian options are available across our core brands,” said Mr Jope, who escapes the pressures of work by embarking on long motorcycle journeys with friends.
“Strategy is about going after what you should go after, not what you could go after,” he said. “We’re playing very aggressively on high-quality, fast-growing beauty and personal care assets, and more selectively on food assets, especially when crazy valuations are involved.” It bought a small Dutch brand called Vegetarian Butcher last year in what Mr Jope described as an “experimental foray”.
Mr Jope’s message on sales growth is likely be welcomed by investors, some of whom have questioned his decision to stick with Mr Polman’s target of lifting operating margins to 20 per cent by 2020. They argue that dropping the goal, which was made as part of Unilever’s rejection of a failed takeover bid from Kraft Heinz in 2017, would give Unilever more room to invest in the business. The new chiefs at PepsiCo, Beiersdorf and Colgate-Palmolive have all introduced so-called “margin resets” in recent months as they seek to invest in flagging brands.
Unilever has a clear path to the 20 per cent margin goal without sacrificing its push for faster sales growth, Mr Jope insisted.
“Our shareholders are very supportive towards our long-term, multi-stakeholder model . . . [they] don’t want me to do anything reflexively for a short-term win that could compromise the health of the business”, he said.
Defending the margin goal is one of several signs that Mr Jope’s tenure has begun with a strategy in keeping with the Polman era, when Unilever became a leading advocate on issues of sustainability and the environment, sometimes to the irritation of its investors.
The Unilever veteran has tried to cannily tweak the message to emphasise how having “purpose-led” brands that stand for ideals — such as social justice for Ben & Jerry’s ice cram and body positivity for Dove — will drive profits not only by attracting customers, but also sharpening its appeal as an employer.
“Brands with purpose grow, companies with purpose last, and people with purpose thrive,” said Mr Jope. “We’re proving that link and it will be our narrative for some time.”
Mr Jope added that Unilever’s longstanding approach of doing lots of relatively small deals, instead of a bigger transformative acquisition, had so far served it well.
If he does decide to embark on a more ambitious deal, however, he may have to return to the thorny issue of simplifying Unilever’s corporate structure — something it was forced to abandon last year after heavy opposition from UK shareholders.
The group’s complex structure, with a UK-listed plc and Dutch-listed NV corporate entity, makes doing any large spin-offs or acquisitions using stock harder. Moving to a single corporate entity with one stock listing would make such moves easier, Mr Jope explained.
Asked if he would want to revive the simplification move anytime soon, he said: “We’re actively working on it . . . We’re working on multiple scenarios looking at the legal, financial, and reputational implications of each of them.
“There is no fixed outcome and no preconceived solution, nor preconceived timing, and it may well end up back in the too-difficult box.”
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