When Unilever’s newly-minted Dutch boss Hein Schumacher spoke to analysts last month his frustration with the world’s biggest ice cream enterprise was clear.
In spite of global warming it had been a dismal year for emblematic brands such as luxury Magnum, quirky Ben & Jerry’s and good old-fashioned Wall’s. The value of sales had increased but volumes had plummeted 6 per cent.
There was no hint that ice cream would be following tea and margarines and spreads out of the door. But behind the façade of Unilever’s landmark white art deco headquarters overlooking the Thames at Blackfriars in London a momentous decision was underway.
Ice cream had become an economic and political distraction for the company’s new leader with the Vermont-based board of Ben & Jerry’s agitating over Palestine and Gaza.
In the past the corporate grandeur and bureaucracy of the Anglo-Dutch giant, the fourth richest company on the London Stock Exchange, would have militated against rapid decision making.
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But Schumacher, with corporate agitator Nelson Peltz in the boardroom, knew he could act fast. Last Tuesday he surprised the City by unveiling plans to hive off ice cream into a separate company with the shares distributed to existing shareholders. The complex disposal would be completed in 2025.
Food, or nutrition, as Unilever pretentiously calls it, is the company’s shrinking secret. Ice cream accounted for more than half of the fast-moving consumer food group’s £11.3 billion of food turnover last year.
Nutrition has become the poor relation in a company where its contribution is dwarfed by beauty and well-being brands such as Dove and Toni & Guy and home care offerings Domestos, Persil and Comfort. Newly acquired hipster health brands, such as SmartyPants Vitamins, are among the stars of the show with sales doubling on a regular basis.
The ruthless decision to exit ice cream immediately raised questions about nutrition’s future in the group. Closely-watched trade publication JustFood noted ‘bets are on over the future of Unilever’s remaining food business’ following the decision to quit ice cream.
What other household names are earmarked for the chop?
The Mail on Sunday understands that apart from Hellmann’s Mayonnaise and Knorr Soups, all other nutrition brands could go – including Bovril, Marmite and the student staple Pot Noodle.
Love it or hate it?: Marmite
In the drive to improve performance and compete better with the listed global rivals Nestle and Procter & Gamble, building on key strengths is going to be critical.
Unilever has great competitive advantage in emerging markets such as Latin America and South Asia where there is a thirst for Western brands which are trusted and regarded by consumers as prestige if not luxury items.
Core to Unilever’s future in such markets is ease of supply and distribution and the ability to deliver great volumes. Among the group’s dozens of remaining food brands, Hellmann’s mayonnaise and other condiments and Germany-based Knorr, famous for its soups, are seen as vital to the future. Unlike ice cream, which poses all kind of distribution difficulties and is a very seasonal product, Hellmann’s and Knorr can be relied upon.
That begs the question as to which of the nutrition brands can be sold in sufficient scale across multiple global markets. There is no shortage of outliers such as Bovril, a British roast beef dinner favourite, and of course Marmite.
Manufactured in Burton upon Trent, the Marmite yeast spread is derived from the wastage of local breweries. It is a quintessentially British product with little global reach. Its long association with Unilever, dating back to the early 20th Century, would make it a tricky disposal for Schumacher even if, like previous chief executives, he is irritated by the attention it receives despite being a minuscule part of the enterprise.
The changing direction of Unilever was evident before Schumacher arrived on the scene. In 2018, when Unilever’s then boss Paul Polman was considering switching the company’s share listing to Rotterdam, I was shown a graphic (privately kept by the company’s finance team) which showed that over a decade personal and home care brands had overtaken nutrition in importance and were soaring away.
The brains and innovation, in which Unilever took great pride, were in the research labs on the Wirral where the company was founded. Over the next year Schumacher and his team will have their work cut out delivering 7,500 ‘office’ redundancies, improving productivity and packaging up ice cream into a separate enterprise.
Dramatic further changes in nutrition brands, everything from smoked sausage Unox to Pot Noodle and Bagel Bagel in Israel, will be in the departure lounge.
There should be no doubt: fundamental change is underway.
