Unilever’s restructuring announcement reflects wider challenges facing FMCG companies: analysis

Unilever’s decision to cut its workforce by 1,500, while making a number of changes to its management team, reflects the challenges consumer goods companies face in attracting the post-COVID-19 consumer, it said. suggested an industry analyst.

“Although COVID-19 restrictions have been eased in many countries, 45% of consumers are still concerned about the pandemic when visiting stores, according to a survey by GlobalData,” commented Ramsey Baghdadi, consumer analyst at GlobalData.

“The number of visitors to stores remains lower than in pre-pandemic periods, which is a direct obstacle to a significant part of Unilever’s portfolio which relies on impulse purchases. The business can no longer be supported by the boosts from panic buying. New product launches and specialty products will likely see less consumer engagement and sales will eventually slow.”

Five business groups

Baghdadi was commenting following Unilever’s announcement that it would reposition itself around five distinct business groups, Beauty and Wellness, Personal Care, Homecare, Nutrition and Ice Cream.

Some 15% of senior managers and 5% of junior managers will be made redundant as a result of the restructuring, while notable management changes have also taken place – for example, Hanneke Faber, formerly President Foods & Refreshment, takes on the role of President Nutrition, while Fernando Fernandez, EVP Latin America, was named President Beauty & Wellbeing.

“Growth remains our top priority and these changes will support our pursuit,” Unilever chief executive Alan Jope said of the organizational changes, which notably come just days after activist investor Nelson Peltz increased his stake in the business, not to mention the group. failed bid to take over GSK’s Consumer Healthcare division.

Commercial flexibility

As Baghdadi noted, Unilever has been flexible before and has the ability to be flexible again, after some restructuring.

“[Unilever] quickly recognized emerging consumer behaviors such as working from home, for example, and was equally quick to respond, with innovative channel strategies such as direct-to-consumer.

“The company would benefit from focusing its attention on strengthening its current product lines and reaching new and existing customers, rather than diversifying into other sectors such as healthcare, as shown by GSK’s offering . If Unilever continues to implement forward-thinking investments, it won’t need healthcare acquisitions to bolster its portfolio.

Restructuring costs

Elsewhere, Barclays noted that Unilever’s announcement does not include any additional restructuring costs, noting that the costs are included as part of a €2 billion restructuring program over 2021 and 2022.

“This implies that the current restructuring costs were below budget and that the additional costs of this reorganization can be absorbed within that budget,” analyst Warren Ackerman wrote.

“Unilever has also not disclosed likely cost savings, but we expect most of the savings generated will be used as fuel to drive Unilever’s revenue growth program.”

Also noteworthy in the statement is the departure of Sunny Jain, a former Amazon executive who ran Unilever’s beauty and personal care arm – he is leaving Unilever to create a tech megatrend investment fund, the company said. company.

“[Jain] came to Unilever with high expectations, given his experience at Amazon but, in our view, his initial presentation at a Unilever CMD was disappointing,” Ackerman noted. “Beauty and Personal Care’s performance has not improved significantly under his leadership compared to what we can see from the outside.”

Unilever is due to announce its annual results on February 10.

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