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* To create five product-focused divisions
* Long-planned revamp comes after failed bid for GSK unit
* Comes amid news of stakebuilding by activist investor
(Adds detail, link to FOCUS)
By Richa Naidu and Pushkala Aripaka
LONDON, Jan 25 (Reuters) - Unilever will cut about
1,500 management jobs and reshape its business to focus on five
main product areas as it tries to boost growth after a failed
acquisition and with an activist investor to appease.
The maker of Dove soap and Magnum ice cream, which employs
about 149,000 people worldwide, said on Tuesday it would focus
on beauty and wellbeing, personal care, home care, nutrition,
and ice cream.
The move, which Unilever said had been in the works for a
year, echoes the reshaping by rival Procter & Gamble (P&G)
three years ago https://www.reuters.com/article/us-procter-gamble-strategy-idUKKCN1ND37M
- which at the time also had activist investor Nelson Peltz's
Trian Partners as a shareholder.
"Moving to five category-focused business groups will enable
us to be more responsive to consumer and channel trends, with
crystal-clear accountability for delivery," Unilever CEO Alan
Jope said.
Unilever, whose shares have fallen by about a quarter from
their record high in 2019, last week effectively abandoned https://www.reuters.com/business/retail-consumer/unilever-says-it-will-not-increase-50-bln-pound-offer-gsk-consumer-business-2022-01-19
plans to buy GlaxoSmithKline's (GSK) consumer
healthcare business for 50 billion pounds ($67 billion).
Its proposal, rejected by GSK, was widely criticised by
investors as being a costly and risky distraction from dealing
with pressing challenges to the business, such as surging
inflation in emerging markets and weakness in healthy foods.
Days later, reports https://www.reuters.com/business/retail-consumer/unilever-shares-gain-after-activist-investor-peltz-builds-stake-2022-01-24
emerged that Peltz's Trian Partners had built a stake in
Unilever, though Trian has not confirmed this.
At P&G, Trian sought to improve the Tide detergent maker's
shrinking market share, low organic sales growth, aging brands,
bureaucracy and excessive structural costs, among other things.
Peltz also pushed for P&G's decision to restructure its business
into fewer units - similar to Unilever's new plan.
Since Trian first invested in P&G, the company's stock price
nearly doubled, and bankers and lawyers who have worked with
Peltz expect he may bring the playbook https://www.reuters.com/article/trian-unilever-playbook/focus-trian-expected-to-revive-its-pg-playbook-with-unilever-idINL1N2U427M
that worked at P&G to Unilever.
However, there may be no quick fix.
"Unilever operates in different product categories so it is
unclear if this same strategy is enough to get growth back and
over what time scale. Typically this takes years rather than
months," Tineke Frikkee, fund manager at Unilever investor
Waverton Investment Management, said.
POOR PERFORMANCE
Unilever, which is expected next month report a decline in
full-year net income, has struggled through the pandemic https://www.reuters.com/business/retail-consumer/unilever-margins-spotlight-inflation-surges-2021-10-20
with rising raw material, labour and transport costs. Its
exposure to certain foods and emerging markets - where inflation
is rising sharply - has also put it at a disadvantage versus
rivals P&G and Nestle.
As Unilever continues to lag, investors have grown
frustrated. On Thursday, British fund manager Terry Smith
criticised the company in a letter to his Fundsmith LLP
investors, calling the lost GSK deal a "near death experience"
and urging management to focus on strengthening performance.
"Unilever management's response to its poor performance has
been to utter meaningless platitudes to which it has now
attempted to add major M&A activity," Smith wrote.
GlobalData analyst Ramsey Baghdadi said Unilever should
focus on strengthening its current product ranges and reaching
new customers, instead of diversifying into other sectors such
as healthcare - as seen in the GSK bid.
Unilever, which traces its roots to a small soap business in
1880s Britain, said it did not expect factory workers to be
impacted by its restructuring. There will be 15% fewer senior
management roles and 5% fewer junior management roles, however.
"While today’s news may not be directly connected to the
company’s failed GSK offer, the timing is unfortunate," Sean
Moran, restructuring specialist at law firm Shakespeare
Martineau, said. "When confidence in a business is low, drastic
decisions must often be made."
(Reporting by Richa Naidu in London and Pushkala Aripaka in
Bengaluru
Editing by Mark Potter)
