Home Business NewsBusiness Unilever’s problems mount up

Unilever’s problems mount up

by LLB Reporter
10th Feb 22 10:38 am

Having been lambasted by investors for caring more about ESG factors than improving the day-to-day business, and then making a punchy takeover bid for GlaxoSmithKline’s consumer healthcare business, Unilever has dusted off its crisis management manual and followed the rule book of how to dig oneself out of a hole.

The company says underlying sales growth is at a nine-year high, it has successfully sold the non-core tea business, there are more share buybacks, and – perhaps most interesting – there are promises not to chase big deals for now.

“But are these results really cause for celebration? First, a big chunk of its sales growth has come from putting up prices which every product manufacturer seems to be doing. Volume growth paints a different story with a mere 1.6% gain – that’s not good when you consider Unilever is meant to own some of the world’s most prized brands. Are these names less relevant to shoppers in a world with increased choice?” says Russ Mould, investment director at AJ Bell.

“Profit margins are under pressure which is a big worry. Again, Unilever’s brands are meant to be world-class, so if a company with its assets cannot defend margins, something is very wrong.

“Then there is the issue of Unilever’s future priorities. It wants to focus more on health, beauty and hygiene than food and drink, yet this could be a big mistake. The food and drink division is the strongest growing part of the business so why would the company lose interest in its best player?

“A month ago, it said major acquisitions should be accompanied by the sale of lower growth brands and businesses. That’s confusing logic given that its lower growth divisions are where it wants to focus.

“All this would suggest Unilever has got itself tied in knots and the shareholder backlash means the clock is ticking for chief executive Alan Jope to properly decide on a long-term strategy to generate sustainable growth otherwise he will be out of a job very soon.”

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