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Unilever announces major shake-up

News, 07 April 2017

LONDON: Unilever has confirmed plans to sell its €6bn spreads business, including such well-known brands as Flora and Stork, following an extensive strategic review of its operations that may also affect the Anglo-Dutch FMCG giant's marketing spend.

The FTSE 100 company, which also owns Dove soap, Hellmann's mayonnaise and many other household brands, will additionally buy back €5bn (£4.3bn) of shares this year and increase its dividend by 12%.

And in another major development, the BBC reported that Unilever intends to review its historic status as a dual-listed company in two countries – the UK and the Netherlands.

The series of changes come just weeks after Unilever successfully saw off a $143bn takeover bid by US rival Kraft Heinz, but that resulted in shareholder pressure on the company to deliver greater efficiencies.

"After a long history in Unilever, we have decided that the future of the spreads business now lies outside the group," said Unilever CEO Paul Polman in a statement.

"We will look to increase our strategic flexibility for further portfolio organisation through a review of the dual-headed legal structure, with a view to simplifying it."

Polman went on to tell the BBC's Today programme that "the events of the last few weeks have pointed out that we have opportunities to drive further value in the business" and that Unilever will ramp up its cost-cutting as it aims to achieve a 20% profit margin by 2020.

When asked about Unilever's margarine business, Polman said it was a "declining segment" that could be "better managed by others", which is likely to encourage rival firms because, as the Financial Times noted, the business continues to be highly profitable.

Unilever's increased focus on profitability and return on investment is also likely to have an significant impact on its marketing strategy.

Graeme Pitkethly, Unilever's Chief Financial Officer, later told investors and analysts on Thursday that the company plans to double efficiency savings from its brand and marketing investment from €1bn by 2019 to €2bn, Marketing Week reported.

This follows its adoption of zero-based budgeting (ZBB), which Pitkethly said had provided much "greater visibility" about its marketing and brand spend.

He added that Unilever plans to cut the number of ads its creates by 30% and it also plans to halve the number of creative agencies it works with globally after finding that it worked with as many as 3,000 of them.

Data sourced from BBC, Financial Times, the Drum; additional content by WARC staff