UPDATE: January 24, 2022: Bloomberg reports that Unilever plans to cut thousands of management positions to speed its decisionmaking, citing unnamed people familiar with the issue.
The report comes after a tumultuous week for Unilever. After affirming in a filing with the U.S. Securities and Exchange Commission that the company's future strategic direction "lies in materially expanding its presence in Health, Beauty, and Hygiene," Unilever walked away from its $68 billion offer for GlaxoSmithKline's consumer healthcare business. Then, reports over the weekend indicated activist investor Nelson Peltz's Trian Fund Management LP had bought a stake in the company. The news both increased the company's stock price and led to the reports of potential layoffs.
Unilever did not respond to requests for comment at press time.
- Unilever may be looking at divesting some or all of its food brands as the company focuses on the health and beauty sector, CEO Alan Jope told reporters on a widely reported Monday phone call. The European consumer goods giant confirmed it is making offers to buy personal care company GlaxoSmithKline's consumer unit, with the latest bid worth £50 billion (about $68 billion), according to Bloomberg. All bids have so far been rejected.
- A document filed with the U.S. Securities and Exchange Commission on Tuesday said the company's board concluded Unilever's future strategic direction "lies in materially expanding its presence in Health, Beauty, and Hygiene." On Monday's call, according to Food Navigator, Jope said that while the company's food and refreshment business — which includes large brands such as Ben & Jerry's, Breyers, Knorr and Hellmann's — has done well during the pandemic, the division's long-term growth has been below other areas of its portfolio. "We have no immediate plans to separate F&R, but rotation of our portfolio is part of upgrading into higher growth spaces," he said. The document filed with the SEC affims Unilever's board's conclusion that big acquisitions should be accompanied by speedy divestment of "intrinsically lower growth brands and businesses."
- Unilever has trimmed its food and refreshment portfolio in the recent past, selling its sizable tea business — which included Lipton and Tazo — to CVC Capital Partners for 4.5 billion euros ($5.1 billion) in November.
Unilever is readying to make a big change in its business, which raises the question for investors and industry watchers: Is one of the world's biggest names in food and beverage preparing to completely exit?
The sale of Unilever's tea business last year shows that anything is possible. Lipton is one of the world's best known tea brands, and its sale demonstrated that the CPG company was interested in treading a new path. Unilever also may have showed that it was ready to make some big business moves when it completely unified its structure — historically split between the U.K. and Netherlands — in late 2020. The move makes divestitures easier, Bloomberg pointed out.
On a global scale, Unilever's Foods & Refreshment division represented 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, which was published last March, prior to the tea divestment. Foods & Refreshment represented 36% of its U.S. business, according to a report focusing on the United States, and four of the company's top 10 brands here — Ben & Jerry's, Breyers, Hellmann's and Knorr — are in the segment.
More recently, the Foods & Refreshment division has had slower growth. According to Unilever's most recent trading update from late October, the segment's sales had grown 3%, though it was mostly through price increases of about 3.8%; volume was down 0.8%.
Investors and analysts seem to be in agreement that Unilever's proposed pivot to health, beauty and hygiene is not the best move for the company. Unilever's stock fell sharply after the company made the announcement, with share prices down more than 10%. Some analysts felt that the move to the more-heavily regulated category would be difficult for Unilever to find growth. But a report from Berenberg quoted by CNN said that the Foods & Refreshments division "actually offers some of Unilever's most attractive categories."
It remains to be seen how Unilever will move forward. The company has recently worked to put itself at the center of new and trendy areas of food and ingredients. In 2018, it acquired European plant-based giant The Vegetarian Butcher, which has not expanded to the United States. Unilever has entered into several ingredient partnerships, including with microalgae startup Algenuity to develop applications for ingredients made from the single-celled organism; European food tech company Enough to use its fermented mycoprotein Abunda in products; and biotech company Holobiome to identify ingredients that benefit the gut-brain axis, which was announced this month. The R&D investment and potential in this space is great — though this may all represent an area that a refocused Unilever may want to hold onto.