Yesterday (26 September), CEO Alan Jope informed the Unilever Board he plans to retire from the company at the end of 2023. Jope has worked at Unilever for more than 35 years and is approaching his fifth year as CEO.
During his time at the helm, Unilever has seen ‘improved performance’ and a ‘significant company transformation’, responded Unilever Chairman Nils Anderson to the news. “Alan’s retirement next year will mark the end of a remarkable career with Unilever.
“Under his leadership, Unilever has made critical changes to its strategy, structure and organisation that position it strongly for success.”
In January this year, Jope announced a business shake-up which saw the company restructured into five divisions: Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream.
Nutrition and Ice Cream brands include Helmann’s, Knorr, The Vegetarian Butcher, Wall’s, Ben & Jerry’s, and Magnum.
In the 15 months that remain – Jope is expected to step down 31 December 2023 – he pledged to remain ‘fully focused disciplined execution’ of Unilever’s strategy and leverage the ‘full benefits’ of its new organisation.
What is Jope’s legacy?
Unilever has undergone some significant changes in recent years.
These include acquisitions – the multinational acquired UK snack brand Graze in 2019 – and divestures: Unilever sold pasta sauce, mayonnaise, and pesto brand Bertolli in early 2021.
A more significant divesture, which was realised in November last year, was the sale of Unilever’s tea business. The company sold its global tea unit, excluding its tea business in Asia and Lipton JV with PepsiCo, to CVC Capital Partners Fund VIII for €4.5bn.
In 2022, Unilever will be remembered for its unsuccessful takeover of GlaxoSmithKline’s consumer health business. It was reported the pharma major rejected Unilever’s £50bn bid, claiming it ‘fundamentally undervalued’ the business.
The bid was met with backlash from shareholders, spooked at the steep price tag.
Later that same month – in January of this year – Jope announced the aforementioned business shake-up, which saw the company split its foods and refreshment division, and around 1,500 jobs cut.
“His legacy will be a unified shareholder structure and listing (long overdue), a hopefully more accountable, category-led organisation and an exit from the slow-growing tea business,” according to investment bank Jefferies Group in a note to investors.
Unilever ‘walking a thin line’ to manage inflation
The market responded favourably to the news of Jope’s retirement, with shares rising 3.7%.
However, Derren Nathan, equity analyst at Hargreaves Lansdown warned the company - which boasts yearly sales of over €50bn - faces a challenge of coping with inflation without losing customers or damaging margins.
Unilever is "responsible for some of the world's most recognisable brands", he noted. "This familiarity and consumer trust is Unilever's superpower, and the reason it's been able to charge a premium for its products.
“But price increases to cope with inflation can only go so far, even with a strong set of brands. The group’s walking a thin line between protecting margins and losing long-term customers.”
If revenue starts to weaken, margins will come under pressure, added the analyst. “Price increases will go a long way to help cushioning the blow, but there’s only so much you can hike before customers walk away.”
For the time being, financials look good. Unilever’s first half revenue of €29.6bn reflects underlying sales growth of 8.1% and improvements across all business divisions. Growth was entirely driven by an increase in pricing, noted Hargreaves Lansdown.
To home in on Unilever’s Foods & Refreshment division, sales grew 7.3% in the first half of the year, with 8.3% from price rises and a 0.9% drop in volumes. Both ice cream and foods enjoyed high single digit growth, with Magnum, Cornetto and Hellmann’s the ‘standout’ brands.
Who will be the next Unilever CEO?
Jope was appointed to the head role in January 2019. His retirement, according to Jefferies, comes ‘earlier-than-expected’.
“…We struggle to believe that a five-year stint was what the Board and Jope had in mind when he was appointed,” noted the investment bank.
The hunt is now on for his successor. The company recently restructured its leadership executive, seeing Hanneke Faber step up to lead Unilever’s Nutrition Business Group and Fernando Fernandez heading up Beauty & Wellbeing.
Jefferies is not convinced an internal candidate will succeed Jope, however, suggesting the odds are stacked against internal candidates – ‘no matter how talented’ – due to the market’s ‘desire for change’.
“We think it’s going to be hard for any internal candidate to rebuild confidence from here and overcome the market’s scepticism around ULVR’s strategy.”
What about an external candidate? Jefferies suggested a search firm would likely be looking for under-55 candidates from peer firms, reflecting an anticipated 10-year maximum tenure. “L’Oreal and Procter emerge as being the most target-rich zones. But it’s going to be hard to pull people from such smooth-running ships, particularly when a relocation is involved.”
At the same time, Reckett is also on the hunt for a new CEO now that Laxman Narasimhan is moving over to Starbucks, which ‘complicates things further’. “RKT will be fishing in the same external pond as ULVR, while at the same time the two leading internal candidates for the CEO role at RKT, Kris Licht and Wolker Kuhn, might be of interest to ULVR. Something of a chess game.”