- Global CPG giant Unilever will lay off about 1,500 managers around the world and restructure its business around five distinct groups: Beauty & Wellbeing, Personal Care, Home Care, Nutrition and Ice Cream. CEO Alan Jope said in a statement that the model will simplify the company's structure so it can be more directly responsive to consumer trends and create more clear accountability for delivery. The job cuts will not impact factory workers.
- In the food segment of Unilever's business, Hanneke Faber, the current president for Foods & Refreshment, will be the president of Nutrition — which will be home to scratch cooking, healthy snacking, functional nutrition, plant-based meat and food solutions. Matt Close, the current executive vice president of Ice Cream, will lead the new Ice Cream business group. These changes take effect April 1.
- Questions about Unilever's future business model have swirled in the past two weeks following reports of the company's unsuccessful bid to buy GlaxoSmithKline's consumer unit. Jope said on a widely reported press call last week that the company may be looking to divest some or all of its food brands as it pivots to focus more on the health and wellness sector.
It's been a difficult 2022 for Unilever. Share prices dropped on news of the CPG company's bid for GlaxoSmithKline, from which Unilever ultimately walked away. Then share prices rebounded after reports over the weekend indicated activist investor Nelson Peltz's Trian Fund Management LP had bought a stake in the company. Jope had said in the media call last week that a structural revamp was coming this month, and Bloomberg reported on the layoffs on Monday, citing unnamed sources.
While the new structure adds more business units to Unilever, it makes a potential sale of one of these divisions much simpler. Previously, the company had three units: food and refreshments, beauty and personal care and home care. By specifically differentiating the company's food brands and ice cream, the structure is in place to easily remove one or both of them without having to untangle personnel, facilities and business agreements. The fact that all of the layoffs are in management roles — and would result in 15% fewer senior level roles and 5% fewer junior positions — adds to this compartmentalizing. The reductions are across the company, so it's unclear if they will equally impact all five divisions. However, eliminating potentially redundant management may also sweeten a divisional sale.
Unilever's statement says this move has been in the works for a year, so it isn't a quick reaction to the recent upheaval over GlaxoSmithKline or the reported Trian stake in the company. However, Reuters reported, these changes are very similar to those that Trian had pushed for at Procter & Gamble, in which the activist firm took a more than $3 billion stake starting in 2017. Peltz served on the P&G board for nearly four years, and was able to drive changes that nearly doubled the consumer brand giant's stock price. Peltz has not yet confirmed a stake in Unilever.
While Procter & Gamble and Unilever are similar in some categories, the latter is unique in that it has such a large food segment. Many companies with more sprawling portfolios that include food have sold off brands in order to focus on other goods. Last year, Unilever took a big step in that direction, selling much of its tea division to CVC Capital Partners for 4.5 billion euros ($5.1 billion). In 2017, Reckitt Benckiser, a British CPG company with products focusing on cleaning and personal care, got out of the food business altogether, selling condiment brands including French's Mustard and Frank's RedHot to McCormick for $4.2 billion. The only other big home CPG company that still has a food division is the Clorox Company, which owns the Hidden Valley brand.
Unlike Reckitt and Clorox, however, Unilever's food division represents a sizable chunk of the company's revenue. On a global scale, Unilever's Foods & Refreshment division accounted for about a third of its total operating profit and about 19.1 billion euros ($21.7 billion) in sales, according to its most recent annual report, published prior to the sale of the tea division. Foods & Refreshment represented 36% of Unilever's U.S. business, according to a report focusing on the United States.
Still, there has been talk among investors and analysts about the possibility of Unilever selling off its food divisions since 2017, when Kraft Heinz's rejected $143 billion bid for the company became public. While Unilever has made acquisitions and forged partnerships to get to the top of food categories including condiments, ice cream, broth and plant-based meat across Europe in recent years, it could be difficult for the company to devote the attention needed to that segment. That's especially true with an activist investor getting involved, and the company's board filing a document with the U.S. Securities and Exchange Commission last week concluding Unilever's future strategic direction "lies in materially expanding its presence in Health, Beauty, and Hygiene."