The UK’s competition watchdog is investigating Unilever, which makes Dove soap, Vaseline and Hellman’s mayonnaise, over “vague and broad” statements made when marketing products that are touted as green.
So what? The investigation is embarrassing for a business that has championed social responsibility, but it’s also the latest indication that a once-mighty multinational is in need of a reset.
Unilever’s numbers tell the story. Its shares are down nearly 10 per cent this year, while the FTSE as a whole edges up around 1.6 per cent. Under former CEO Paul Polman’s decade in charge, which ended in 2019, total shareholder return was close to 300 per cent.
Polman’s successor was Alan Jope, a Unilever insider who joined as a graduate trainee in 1985. His five years at the top were rocky.
- While condemning Putin’s invasion of Ukraine, Unilever decided to stay, both to protect its workers and prevent its Russian business ending up under state control.
- Last year, Unilever fumbled a £50 billion takeover bid for GlaxoSmithKline’s healthcare unit, walking away after analysts and shareholders questioned the rationale and high price of the deal.
- The business was attracting increasing scorn for its commitment to social purpose. As the asset manager Terry Smith noted, consumers had figured the purpose of mayonnaise is “salads and sandwiches”.
Hein Schumacher, the new CEO, says the company will stop “force-fitting” purpose across all of its brands.
But the questions for Unilever’s board now extend across its culture and strategy:
What’s it for? (1) Employees rely on senior management to set the tone. Changes of direction make it hard to win and retain workforce support.
With public companies increasingly required to make mandatory climate disclosures, sustainability will become a given. The job of the board will be to ensure that the whole company understands this, and allies its sustainability targets to business objectives, such as increasing energy efficiency or driving sales with more sustainable products.
What’s it for? (2) Unilever’s business strategy looks woolly. Jope emphasised its beauty products, faster-growing than food. But building a successful beauty business takes stamina (it’s not coincidental that it’s often family businesses, with intergenerational timespans, who do best at luxury cosmetics).
Unilever has often looked like it’s chasing the latest fad, and giving up on its weaker performers rather than attempting to turn them round. One example is buying the healthy snack brand Graze; another, the sale of its tea business, which includes PG Tips. Fee-hungry bankers are always keen to encourage dealmaking. The job of the board at Unilever now is to
- help restore discipline and focus; and
- answer those greenwashing charges in a way that restores consumer trust.
The pandemic and the cost of living crisis has affected all consumer goods companies, hit by higher costs of inputs and consumers switching to cheaper alternatives. But the post-Covid emphasis on self-care and a consumer shift away from the least healthy groceries should be an advantage for a company that straddles soup and soap.
