Unilever must live in the real world and not a woke one
Radical reboot of the company is vital for its survival – and the new flamboyant board member may be the right person to shake it up
An ice-cream manufacturer with cookie dough for brains running its own foreign policy. A mayonnaise with more social purpose than flavour. A commitment to just about every fashionable cause except for making returns for shareholders, and a chief executive who staggers on in office after the most inept, laughable attempt at a mega-merger of recent years. If an argument ever needed to be made for why corporate raiders, for all their faults, were a vital part of a vibrant free market economy then Unilever would exhibit A, B and C. And in Nelson Peltz, one has finally arrived.
True, the flamboyant, Trump-supporting American billionaire won’t be to everyone’s taste, to put it mildly. Both his politics, and more importantly his take on what a private corporation actually exists for, promise some fireworks in the boardroom. But the blunt truth is this. Unilever has been drifting for years, devoting all its energies to pious virtue signalling, but bereft of ideas and imagination, and with about as much energy as a cup of Horlicks. A radical reboot of the company would be welcome for its customers, its staff, and of course the British economy as well.
It says something about how weak Unilever’s position has become that Peltz was offered a seat on the board so quickly. It emerged in January that his Trian investment vehicle had started building a stake. A more confident company would have noted that politely, and, at most, offered to buy him lunch. Instead, and even though Peltz’s stake is still only a relatively minor 1.5pc, and he is only the fourth largest shareholder, it offered a place at the top table.
The reason is not hard to figure out. Unilever knows that plenty of its shareholders are unhappy with its management. An experienced activist such as Peltz, who has made his fortune shaking up food and consumer goods giants such as P&G and Danone, would quickly pick up plenty of support in the City and elsewhere. A full-scale assault would prove easy. It makes a lot more sense to bring him into the fold.
Here’s the important question, however. Can Peltz be the radical force for change the company so desperately needs? Or will he be effectively muzzled by Unilever’s wishy-washy brand of corporate complacency?
It has been a terrible five years for what should be one of the UK, and Europe’s leading businesses. The shares have drifted aimlessly. Over the past five years they have fallen by 13pc. That compares to a 41pc gain over the same period for its great rival, the Swiss giant Nestlé and 66pc for Proctor & Gamble. By any measure, that is unacceptable.
The company has stumbled from one mistake to another. Under its former chief executive, the saintly Paul Polman, it allowed itself to become far too tied to the Remain cause, when it would have been sensible for it to remain neutral.
It appointed an insider Alan Jope as successor, a man steeped in the company’s listless culture, when the moment was clearly ripe for a radical outsider to come in, and, even worse, the board remained silent while the new chief executive launched a hopelessly misconceived and poorly executed bid for Glaxosmithkline’s consumer division that was rebuffed quicker than you can whip up one of its Pot Noodles.
Even worse, it has allowed itself to be dominated by a form of gesture politics that would be better suited to a student union than a major corporation. Its ice-cream brand Ben & Jerry’s appears to be running its own foreign policy, although it is hardly Henry Kissinger, calling for disarmament in Ukraine just before Russia invaded and before that boycotting the Palestinian territories in a protest against the Israeli government. It has prioritised giving Marmite and Hellmann’s mayonnaise a social purpose, and concentrated on diversity, inclusiveness and equality over making new and better products. And worse, when the moment arrived for major companies to actually make a stand on an important issue, following Russia’s invasion of Ukraine, it completely ducked the issue, arguing that Magnum ice creams were an “essential food”. When the veteran investor Terry Smith accused the company of “losing the plot” earlier this year, pointing out that sandwiches and salads were enough purpose for a mayonnaise, most investors will have agreed.
Whether Peltz can start to fix that remains to be seen. So far, the company seems oblivious to how deep the malaise has gone, and clueless on how to fix it.
In reality, Unilever needs the kind of fresh thinking, energy and focus that an experienced investor such as Peltz can inject. A board seat should just be the start. It needs new management teams, new advisers, and finance professionals who can impose some genuine discipline on its sprawling empire. Most of all, it needs to start launching some exciting products. From new health products, to subscription services, to home deliveries, there is no shortage of opportunities. It is just that no one at Unilever has had the energy to grasp them.
And if Unilever puts up too much resistance – and it would be no surprise if its executives did their best to muzzle the American – then he should resign, and put together a coalition of investors to demand a complete overhaul.
At best, Unilever has a year to shake itself up, and start getting back to business. If it doesn’t, it is condemning itself to steady decline until it finally gets taken apart by one of the private equity firms – and that would be a tragic waste of what should be one of Britain’s great companies.
‘It has been a terrible five years for what should be one of the UK’S leading businesses’