LONDON: As a senior Unilever executive in Brazil some 15 years ago, Fernando Fernandez made a bold gamble on hair care and beauty, rapidly expanding the then newly acquired TRESemme brand into a major money-spinner in the giant South American market.
The 59-year-old Argentine is now chief executive officer (CEO) and going back to his roots, carving off the sprawling consumer goods firm’s food brands, from Magnum ice creams to Hellmann’s mayonnaise, with two huge deals since he took the reins last year.
This week, Unilever sealed a deal with US spicemaker McCormick to hive off its food business to make a US$65bil sauces-to-spices food giant. Unilever will retain a near 10% stake, with its shareholders having another 55%.
The recent spin-offs leave the firm a far leaner beast focused on beauty, personal care and home care, areas where Fernandez spent most of his 38-year career at Unilever selling products from Dove soap to Surf laundry detergent.
“This is the right step at the right time to build a simpler, sharper, higher-growth Unilever,” Fernandez told analysts on a call after sealing the McCormick deal.
“We are creating a €39bil household and personal care pure play with leading positions in highly attractive categories, a stronger exposure to fast-growing geographies like the United States and India.”
Without food and ice cream, Fernandez is leaning in to the company’s 23 biggest home, beauty and personal care “power brands” that account for the majority of Unilever’s sales, including Dermalogica, Pond’s, Sunsilk and Cif.
Most investors didn’t take the news well, with Unilever shares closing at a two-year low on Tuesday and dipping further on Wednesday amid worries about the lengthy timeline to closing the deal in 2027 and the overhang from food.
“Perhaps the most overlooked benefit is the increased focus gained by simplifying Unilever’s business model,” David Samra, managing director of Unilever investor Artisan Partners and founding partner of the International Value Group, told Reuters.
“The company moves from operating in two distinct industries to concentrating on a narrower group of brands in faster-growing markets.”
The food business is high-margin but sales growth has lagged other units, weighing on Unilever’s goal to increase turnover by 4% to 6% annually. — Reuters
