What is happening?
Unilever is a £111 billion leviathan, best known for Marmite and Hellmann’s mayonnaise, but also the name behind Cif, Dove, Persil, Sunsilk, Surf and Lynx cologne.
This week, King Charles was urged by a Ukrainian campaign group to strip Unilever of its royal warrants as the company continues to operate in Russia.
Unilever’s CEO Hein Schumacher (52) says the matter is ‘not simple’ because, if Unilever leaves Russia, its assets could be seized by allies of President Putin.
However, the company is making other big changes.
Tell us more
Super-sized conglomerates are somewhat out of fashion and Unilever will spin off its ice cream subsidiary. Ice cream is a low-margin business.
Is it big on ice cream?
I should say that. The division, which includes Ben and Jerry’s, Magnum and Wall’s, could be worth as much as £15 billion. It is not yet known what the demerged company will be called – or where it will be listed. Amsterdam or New York could win this prize as some think the London market has the appeal of a melted vanilla cornet.
Is the sale part of a bigger plan?
The group has developed a Growth Action Plan. One of its proponents is Nelson Peltz, an extraordinary American activist (and father-in-law of Brooklyn Beckham). His campaign for a makeover at Unilever won him a seat on the board. Peltz opposed the previous emphasis on sustainability over performance. Fund managers like Fundsmith’s Terry Smith were also unimpressed by the company’s woke agenda. Why should mayonnaise have a ‘purpose’?
What is the strategy behind the plan?
Unilever will focus on its thirty energy brands, which account for 75 percent of the group’s turnover, around €15 billion (12 billion). These brands are seen as ‘pricing power’, meaning customers will pay more rather than switch to a competitor’s cheaper products. The power brands include Marmite and Dove, but also the more obscure Paula’s Choice.
I don’t know that product…
This range is one of Unilever’s higher-end cosmetics and skincare brands, which have thrived despite the cost of living crisis.
How have Unilever shares performed?
Over the past ten years, shares have fallen 11 percent. But they are up 17 percent since January to 4434p.
Are Unilever shares worth a bet?
Most analysts rate the shares as ‘hold’. But Smith is now an enthusiast and says the group has potential. Deutsche Bank analyst Tom Sykes sees this as a buying opportunity, with a target price of 4600p.