New Unilever CEO’S strategy underwhelms investors

2 mins read

Unilever Plc has undergone significant leadership and strategic changes under the new CEO, Hein Schumacher, who is committed to revitalising the company’s market position following a decline in its ability to gain market share.

Schumacher, a Dutch executive, unveiled a new direction for Unilever, emphasising a focus on the company’s top 30 brands, which constitute approximately 75% of its revenue. The aim is to drive growth through strategic investments in these key brands while streamlining the company’s portfolio by reducing emphasis on other segments.

Notably, Schumacher ruled out major acquisitions and remained committed to the company’s long-term sales targets. He is opting to allocate more resources to marketing in order to enhance Unilever’s competitiveness rather than seeking high-profile acquisitions.

This approach marks a departure from the strategy pursued by the former CEO, Alan Jope, who faced criticism for an unsuccessful attempt to acquire GSK Plc’s former consumer health business. Jope had also emphasised the social purpose of Unilever’s brands, a focus that some investors believed came at the expense of profitability.

Following Schumacher’s announcement, Unilever’s shares experienced a decline of up to 3.5% in London, trading near a one-year low. The company’s market share growth had dropped to an all-time low of 38%, as consumers switched to competing products to save money. Additionally, third-quarter sales growth fell slightly short of expectations.

This new strategy, which did not involve significant restructuring of the company’s portfolio, received criticism from analysts. Tineke Frikkee, Head of UK Research at Waverton, which holds Unilever shares, described the results as underwhelming. The multi-year growth target of 3% to 5% was seen as inadequate compared to current inflation rates.

Schumacher expressed his determination to reverse the company’s recent underperformance due to past strategic missteps, and he also announced plans to divest non-core products. One such divestment is the sale of a stake in Dollar Shave Club, a razor business that Unilever had acquired for $1 billion in 2016. Schumacher, who assumed the role of CEO in July, came to Unilever from one of Europe’s largest dairy cooperatives.