Make sure you hire an outsider as the next chief executive, went the clamour from Unilever’s frustrated shareholders when the current boss, Alan Jope, said last September he’d be checking out.
The sense that the Dove-to-Marmite titan requires a kick that only a newcomer can deliver has been overwhelming ever since Unilever’s misadventure a year ago in trying to buy GlaxoSmithKline’s consumer products division, now demerged as Haleon. That folly was abandoned when the group’s own shareholders rebelled, arguing that Unilever should fix the businesses it already owns before attempting splashy £50bn-plus purchases.
Unilever has only half-obliged on the outsider front. Having conducted what it describes as “an extensive, global search process”, it has decided the best candidate was found in its own boardroom. Hein Schumacher, head of a Dutch dairy co-operative, is one of the non-executive directors.
The 51-year-old Schumacher got the non-exec gig only last October, so is untainted by the “near death experience,” as fund manager Terry Smith described the GSK debacle. If a cooperatively-minded Dutch milkman sounds an unlikely appointment for a £100bn stock market colossus, his current shop, Royal FrieslandCampina, is bigger than you might think with annual turnover of €11bn (£9.6bn), branches in 34 countries and 23,000 employers. Schumacher’s more relevant experience, though, is probably a previous long stint in the rough and tumble environment of Heinz.
This looks, then, like a classic fudge: an external hire but one with strong links to the company (Schumacher also started his career at Unilever). There’s something for everyone. Those investors pining for a red-in-tooth-and-claw big name will be reassured that Nelson Peltz, the activist in Unilever’s boardroom who is nobody’s idea of a pussycat, offered enthusiastic support for the appointment. Meanwhile, Dutch sensibilities, which were upset when Unilever was forced to unify in London rather than Rotterdam, may be smoothed by the sight of a local in charge again.
Schumacher would be well-advised to ignore the history. The position today is that grumbling shareholders are basically correct that Unilever is off the pace set by the likes of Procter & Gamble and Nestlé. The target of 20% operating margins – made in response to Kraft Heinz’s aborted bid in 2017 – was junked well before the pandemic and inflation complicated the picture. Last year Unilever turned in 16.6% – very nice in most industries, but direct rivals do better in fast-moving branded goods.
Since then Jope has launched one of those enormous internal reorganisations in which Unilever seems to specialise. To be fair to him, the restructuring into five divisions may be an improvement and there has been no obvious trading hangover from the GSK diversion. But it’ll take more than a couple of decent quarters to shake the impression of a sleepy giant.
There is probably zero chance of Schumacher toning down the sustainability ethos that Smith likes to ridicule as “purposeful mayonnaise”. Nor should there be: it’s what you’re always going to get from Unilever. The complaint should really be about the failure to convert “values” into faster growth.
Smith’s other recent criticism, though, was on the money. How is it that Unilever can fork out $1bn (£800m) on Dollar Shave Club in 2016 and €2.3bn on a skincare business called Carver Korea in 2019 and barely mention their subsequent performance? As Smith said, it is probably not that these operations are turning in embarrassingly good numbers. More rigour and disclosure is definitely needed.
Schumacher would also do everybody a favour – employees and investors alike – by saying at an early stage if he’s wedded to the food business that Jope was prepared to sell to get the GSK consumer deal done. The lazy assumption is that a boss with a dairy background must like food, especially ice-cream – but it ain’t necessarily so. The demerger idea continues to fascinate the City. Clarity is needed.
But, in essence, the task is simple. This is a job about operational execution. Unilever owns a wonderful collection of well-invested brands with great market positions around the globe, but the pedestrian share price suggests unfilled potential – something the company more or less admits. Schumacher has had a look from the inside for four months and now has another six before he takes over. The milkman must arrive with a plan for speedy delivery.
