Unilever Slashes 1,500 Managers After Turbulent Beginning To The Year

Unilever will slash approximately 1,500 managerial posts as the company strives to enhance growth following a failed purchase and with an activist investor to placate. The company will also reconfigure its business to focus on five core product categories.

The company behind Dove soap and Magnum ice cream, which employs 149,000 people globally, announced on Tuesday that it would concentrate on beauty and wellbeing, personal care, home care, nutrition, and ice cream.

The move, which Unilever said has been in the works for a year, mimics competitor Procter & Gamble’s (P&G) restructuring three years ago, when Trian Partners, an activist investor, was also a shareholder.

“Moving to five category-focused business groups will enable us to be more responsive to consumer and channel trends, with crystal-clear accountability for delivery,” Unilever CEO Alan Jope said.

Unilever essentially abandoned ambitions to acquire GlaxoSmithKline’s (GSK) consumer healthcare unit for 50 billion pounds ($67 billion) this week, after its shares fell by almost a quarter from their record high achieved in 2019.

Investors panned its suggestion, which was turned down by GSK, as a costly and hazardous diversion from the company’s critical issues, including rising prices in emerging markets and weakness in healthy foods.

Peltz’s Trian Partners was said to have built a stake in Unilever a few days later, however, Trian has not verified this.

Trian aimed to improve P&G’s losing market share, low organic sales growth, aging brands, bureaucracy, and excessive structural expenses, among other things, at Tide.

Peltz also lobbied for P&G to reorganize its business into fewer divisions, akin to Unilever’s new strategy.

Trian’s investment in P&G has nearly doubled the company’s stock price, and bankers and attorneys who have worked with Peltz believe he will bring the P&G playbook to Unilever. There may, however, be no quick remedy.

“Unilever operates in different product categories so it is unclear if this same strategy is enough to get growth back and over what time scale. Typically this takes years rather than months,” Tineke Frikkee, fund manager at Unilever investor Waverton Investment Management, said.

Unilever, which is projected to disclose a drop in full-year net income next month, has struggled to keep up with increased raw material, labor, and transportation expenses during the pandemic. Its exposure to particular goods and emerging economies, where inflation is rapidly growing, has put it at a disadvantage compared to competitors P&G and Nestle.

Investors have become irritated as Unilever continues to lag. In a letter to his Fundsmith LLP investors on Thursday, British fund manager Terry Smith slammed the company, calling the failed GSK transaction a “near-death experience” and asking management to focus on improving performance.

“Unilever management’s response to its poor performance has been to utter meaningless platitudes to which it has now attempted to add major M&A activity,” Smith wrote.

Instead of branching into other industries like healthcare, as shown in the GSK offer, GlobalData analyst Ramsey Baghdadi believes Unilever should focus on enhancing its present product categories and attracting new clients.

Unilever, which began as a modest soap manufacturer in 1880s Britain, claimed industrial workers will not be affected by the restructuring. However, there will be 15% fewer senior management positions and 5 per cent fewer junior management positions.

“While today’s news may not be directly connected to the company’s failed GSK offer, the timing is unfortunate,” Sean Moran, restructuring specialist at law firm Shakespeare Martineau, said. “When confidence in a business is low, drastic decisions must often be made.”

(Adapted from DevDiscourse.com)

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