UK – Unilever chief Hein Schumacher has deflected any prospect that food might be spun off as a separate business unit despite the UK-based FMCG company reporting a decline in volumes across food divisions, while volumes rose in other business areas – personal and home care, and beauty and wellbeing.
Unilever’s volumes in nutrition and ice cream dropped in the third quarter and over the year so far, although the categories posted underlying sales growth (USG).
Third-quarter retail ice cream volumes fell 10.1% and were down 6.9% year to date, while Nutrition volumes dropped 3.8% and 2.6%.
“Our performance in nutrition and ice cream needs to improve from here,” Schumacher who took up the role on 1 July said adding that there would be “no major transformational acquisitions” in the near future.
When asked about potential disposals or splitting up food if the segment does not improve performance by analysts during a Q&A session Schumacher responded by saying, “We see the biggest value creation opportunity in operating our current businesses very well.”
“Things can always change at some point in time but I believe that the current value-creation opportunity that is on the table is really to improve our business that we have, while we continue to optimise the portfolio like we’ve done in the last two to three years.”
His predecessor Alan Jope had also warded off the possibility of spinning out food – nutrition and ice cream – during his tenure, although he did reorganise Unilever’s business units last year.
“Action plan” to address underperformance
In place of spin-offs, Unilever has put in place an “action plan” centred on “faster growth; productivity and simplicity; and performance culture” to address underperformance.
The plan is aimed at “strengthening” the group’s “multi-year financial framework”, including achieving annual underlying sales growth (USG) of 3-5%.
Schumacher explained the thinking behind the action plan today, including increasing innovation and investment in the so-called billion-euro power brands and “leveraging the full strength of our operating model”.
“Unilever is a company with strong fundamentals: a portfolio of great brands used by 3.4 billion people each day, number one or two category positions across 80% of its turnover, an unrivalled global footprint, and a team of talented people,” he added.
“Despite these strengths, our performance in recent years has not matched our potential. The quality of our growth, productivity and returns have all under-delivered.”
Under the faster growth objective, Unilever aims at delivering brand “superiority”, investment and returns, along with premiumisation.
The Hellmann’s mayonnaise and Magnum ice-cream maker also said it aims to “selectively optimise the portfolio” with “no major or transformational acquisitions”.
Rebuilding the gross margin and sustainability initiatives will fall within productivity and simplicity, while Unilever will instigate executive changes in business areas from 1 January under the performance culture objectives.
