Former Unilever chief executive Paul Polman is remembered for the unwanted takeover bid he fended off. Outgoing Unilever chief Alan Jope will be remembered for the unwanted takeover bid he pursued.
In January the markets gave the London-based consumer group’s shares a drubbing following Jope’s misjudged plan to buy GSK’s own consumer goods unit, Haleon, ahead of its scheduled spin-off. The stock price may have since recovered, confidence in the chief executive has not. Unilever shares jumped as much as 3 per cent in early trading on Monday after the company said Jope would retire at the end of 2023, completing five years in the job.
Ironically, the legacy of Polman’s defence of Unilever against Kraft Heinz’s $143bn bid probably hamstrung Jope, whose tenure has been dominated by a tug between growth and profitability.
Polman offered investors a target of 20 per cent operating margins by 2020 as the price of maintaining its independence at a time when the US group had set the industry standard for cost-cutting and profitability. Jope’s early commitment to that aim constrained his ability to invest in boosting growth, now investors’ major gripe with the company.
On just under 18 times forward earnings, its shares lag behind Nestlé and Procter & Gamble on 22 and 23 times, according to data from S&P Global. Commodity price inflation has, meanwhile, reset margin expectations, forecast at closer to 16 per cent this year.
Some of Jope’s growth initiatives may soon start to pay off. Ending a cumbersome dual-headquarters arrangement and simplifying Unilever’s reporting structure along divisional lines should improve manager accountability and agility.
Still, high inflation and declining consumer confidence complicates shareholder efforts to understand underlying progress. Jope’s failure to keep a lid on a distracting dispute with the co-founders of its Ben & Jerry’s brand also signals that central management lacks complete control.
Jope’s unnamed successor will need to do more. Activist Nelson Peltz, granted a board seat in May, will see to that. An unanswered question lingers as to whether investment can deliver growth. Perhaps Unilever requires profound surgery of a portfolio rationalisation in the form of divisional sales or spin-offs.
Offering £50bn for Haleon, a business now valued at about £36bn including debt, was not the answer investors wanted to Unilever’s growth problem. Unilever’s next chief executive needs to set out a coherent competing vision.
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