As consumer giants struggle, Unilever rises above the pack


Shortly after taking over Unilever, Polman met with investors in London and withdrew guidance to security analysts and quarterly earnings, telling them, “My job is not to serve shareholders, but to serve consumers and our customers.” Of course, he believes that in doing so, Unilever will indeed serve its shareholders better over the long-term. Unilever’s results in nine years back up Polman’s contention: Unilever’s stock value has grown 155 percent during his tenure. As he jokingly told CNBC’s Jim Cramer, “Our record is better than Warren Buffett’s in this time frame.”

The joke, however, is also true.

Under Polman, Unilever has eschewed big acquisitions, the largest being the purchase of Alberto Culver. But the company has transformed its portfolio by acquiring a series of small companies that strengthened its sustainability offerings, e-commerce business, and attractiveness to the millennials. Included among them are Dollar Shave Club, Seventh Generation, Sir Kensington’s, Talenti, Sundial, Living Proof, and Schmidt’s Naturals.

Polman’s toughest test came in February, 2017, when Brazilian investment fund 3G Capital attempted a hostile takeover through its Kraft-Heinz Company (KHC), offering $143 billion for Unilever. 3G had the backing of Warren Buffett, and had established itself as a fierce, unyielding acquirer. KHC offered a modest premium of only 18 percent and planned to shift Unilever from its growth posture to 3G’s trademark “lean and mean” mode, employing zero-based budgeting to cut costs 30 to 40 percent to increase earnings and cash flow. As Polman noted wryly, “You can’t cut your way into prosperity or growth.”

Many analysts thought Unilever was a goner. Yet, Polman immediately swung into action, firmly rejecting the 3G offer, not even leaving the door open to negotiation for higher offers. Polman’s rebuttal was so fierce that within 48 hours KHC withdrew its offer, and has shown no further signs of renewing its attack. Nevertheless, Polman committed to a complete review of ways Unilever could improve shareholder value. Six weeks later he announced a 7-point plan to enhance value that include spinning off Unilever’s legacy spreads business, improving operating margins from 16 percent to 20 percent, buying back 5 billion euros of stock, cutting costs by an additional 2 billion euros, and consolidating its foods and refreshments business units into one. More recently, Unilever announced it will move its corporate headquarters from London to Rotterdam.

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