So far, so good. Patrick Cescau, Unilever’s chief executive, seems to be gradually winning back the confidence of investors, although, as one shareholder recently put it, “Unilever is a bit like Pirates of the Caribbean 3: it could be so much better than it is.”
The Anglo-Dutch group has been trailing its peers in the food business (such as Nestlé) and in the personal and home care products sector (such as Procter & Gamble). And it has infuriated investors in the past with its unwieldy, bureaucratic culture and poor management.
Mr Cescau took charge of the company two years ago and knew he had to make some swift changes. Already there are signs of industrial restructuring in the conglomerate’s vast portfolio of brands, as well as in its overstaffed factories. But the harder thing he has had to tackle in this cumbersome institution – sometimes compared to the civil service – is the culture.
Perhaps that is why the French chief executive this summer invited Sanford C. Bernstein food and household products analysts to address senior executives and present them with an outsider’s “provocative view” of Unilever’s strengths and weaknesses.
The self-proclaimed purpose of the exercise was to get management to question themselves and their company.
The conclusion of the experts – now published in a report – was that there was more value to be had by simply managing the business better and focusing on the high-growth brands and markets in both food and personal and home care.
“If the business were managed better, we believe there would be huge valuation upside,” the Bernstein report says, noting that Unilever has some excellent assets, particularly in its emerging markets exposure and its personal care activities.
Some investors have called for the group to split its food and personal and home care businesses. But the analysts do not appear to consider there would be a great deal of value to be gained from such a move.
Sure, Unilever needs to take a radical look at what its portfolio of brands should look like in five or 10 years’ time and start acting now.
But it also needs to introduce a less bureaucratic, more dynamic and aggressive culture, assisted by more external appointments. Indeed, it has started doing this with the recent arrival of two outsiders in important jobs: Michael Treschow as chairman and Jim Lawrence as chief financial officer. And it must also learn to become more transparent and informal, and less defensive, when communicating with investors and the world at large.
Whatever the outcome of the report, Mr Cescau, who has worked for 34 years at Unilever, seems to have been clever in more than one way. Bringing in some outside experts to shake up the old-established manner of thinking at Unilever with a sharp focus on shareholder value may well have helped steal the thunder from any potential activist investor thinking of launching an assault on this most conservative of companies.
For a while now, those promoting London as a financial centre have warned that any increase in the regulatory or tax burden on UK-based firms might prompt an exodus of top people to more accommodating jurisdictions.
The threat has often been backed up by tales of Swiss cantons stalking UK-based private equity and hedge fund partners to persuade them how easy it would be to decamp to the Alps.
Left-wing critics of the UK government’s friendliness towards the City of London have tended to discount such tales as scaremongering.
But, whether or not the cantons’ fifth columnists are at large, Thursday Swiss financial services companies will go public with a “Master Plan” to secure Switzerland’s position as a financial centre.
Having a plan – even one cleverly timed for the month before a Swiss general election – is not the same as having a plan implemented, let alone persuading financiers to abandon the accumulated advantages of London for a view of Lake Lucerne.
Backers of the Swiss plan also include financial giants such as UBS and Credit Suisse that have established deep roots in London themselves.
But the outlines of the Swiss campaign will look familiar to supporters of the City: abolition of stamp duty, tax changes.
At a time when British unions and hard-left politicians are again revving up the rhetoric for a regulatory and tax clampdown on buy-out firms and hedge funds, the Swiss plan is a timely reminder that London’s rivals are waiting to take advantage of any adverse adjustments that tip the delicate balance in their favour.
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