Unilever's decision to cut its workforce by 1,500, while also making a number of changes to its leadership team, reflects the challenges facing consumer goods firms in appealing to the post COVID-19 consumer, an industry analyst has suggested.
“Although COVID-19 restrictions have been alleviated in many countries, 45% of consumers are still concerned about the pandemic when visiting shops, according to a survey by GlobalData," commented Ramsey Baghdadi, consumer analyst at GlobalData.
"Shop visitor numbers remain lower than pre-pandemic periods, and this is a direct barrier to a significant portion of Unilever’s portfolio that relies on impulse buys. No longer can the company be supported by boosts from panic buying. New product launches and specialised products will likely see less consumer engagement, and sales will ultimately slow."
Five Business Groups
Baghdadi was commenting following Unilever's announcement that it will be repositioning itself around five distinct business groups, Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream.
Some 15% of senior managers and 5% of junior managers will be let go as a result of the restructuring, while there have also been some notable management changes – for example, Hanneke Faber, formerly President Foods & Refreshment, takes on the role of President Nutrition, while Fernando Fernandez, EVP Latin America, has been appointed President Beauty & Wellbeing.
"Growth remains our top priority and these changes will underpin our pursuit of this," Unilever chief executive Alan Jope said of the organisational changes, which notably come just days after activist investor Nelson Peltz increased his stake in the business, not to mention the group's aborted bid to take over GSK's Consumer Healthcare division.
Business Flexibility
As Baghdadi noted, Unilever has proven itself to be flexible before, and has the capability to be so again, following some restructuring.
"[Unilever] quickly recognized emerging consumer behaviours such as working from home, for example, and was just as quick to react, with the likes of innovative channel strategies such as direct-to-consumer.
“The company would benefit from focusing its attention on strengthening its current product ranges and reaching new and existing customers, instead of diversifying into other sectors such as healthcare—as seen in the GSK bid. If Unilever continues to implement forward-thinking investments, it will not need healthcare acquisitions to strengthen its portfolio.”
Restructuring Costs
Elsewhere, Barclays noted that the Unilever announcement doesn't include any incremental restructuring costs, noting that the costs are being included as part of a €2 billion restructuring programme across 2021 and 2022.
"This implies that the current restructuring costs were running below the planned budget and the incremental costs of this re-organisation can be absorbed within that budget," wrote analyst Warren Ackerman.
"Unilever has not disclosed likely cost savings either, but we would expect most of the savings generated to be used as fuel to drive Unilever’s top-line growth agenda."
Also of note in the statement is the departure of Sunny Jain, a former Amazon executive who headed up Unilever's Beauty & Personal Care arm – he is leaving Unilever to set up an investment fund in technology megatrends, the company said.
"[Jain] came into Unilever with high expectations, given his background at Amazon but, in our opinion, his initial presentation at a Unilever CMD was disappointing," Ackerman noted. "The performance of Beauty and Personal Care didn’t noticeably improve under his leadership from what we can see from the outside."
Unilever is set to announce its full-year results on 10 February.
© 2022 European Supermarket Magazine – your source for the latest A-Brands news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
