Time for Unilever to ‘Raise Its Game’ Says New CEO Hein Schumacher
LONDON — Hein Schumacher, Unilever’s new chief executive officer, wants the consumer giant to seize market share with breakthrough technologies, “superior” products and a laser focus on the consumer, he said during the group’s first-half results presentation Tuesday.
Schumacher, a Dutch national and former CEO of Royal FrieslandCampina, an international dairy and nutrition business, left few in doubt about his ambitions for the parent of brands such as Dove, Vaseline, Hellmann’s and Ben & Jerry’s.
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Since he stepped into the role three weeks ago, Schumacher has been traveling the world, meeting stakeholders, and hammering out his strategy for the consumer giant, which revealed a healthy 2.7 percent uptick in first-half turnover to 30.4 billion euros.
Underlying sales were up 9.1 percent due to price rather than volume growth as high input costs continue to bite.
In his debut presentation to analysts, the straight-talking Schumacher said that research and development, and better quality products, are key to the company’s future success.
“I want to get much closer to the way that we resource our big brands, and to land innovations that really move the needle. We need to make sure that we are investing consistently in high-quality, focused, and science-backed innovation.”
RBC Capital Markets said the R&D announcement was unconventional.
“We felt that new CEO Hein Schumacher came across well,” the bank wrote. “We liked what we heard about the prioritization of R&D, something of an untried tactic in our consumer staples universe, but one which we feel should work well.”
Overall, the bank described the results as an “excellent sign-off” by former CEO Alan Jope, noting that sales, EBIT (earnings before interest and taxes) and EPS (earnings per share) “comfortably” beat expectations.
In his presentation, Schumacher added that quality is non-negotiable.
“I want to see more of our products performing better than the competition. Our brands should be winning superiority tests week in and week out. And when they are not, we should be taking decisive action. In this industry, the consumer always has the final say, and that means it is paramount to invest behind holistic product quality,” he said.
He made the remarks as Unilever disclosed that its market share is dwindling. In the second quarter, the proportion of business gaining market share was 41 percent, the second-lowest competitiveness percentage ever disclosed by the corporate giant, according to Bernstein.
“To be losing market share nearly 60 percent of the time is a very bad performance, and rightly Hein Schumacher’s top priority,” wrote Bruno Monteyne of Bernstein. “What kind of margin investment and cultural change will it take to get back to brands that gain market share?”
Jefferies noted that while Unilever’s half-year growth was ahead of expectations, “the percentage of the business winning market share on a rolling 12-month basis has fallen to 41 percent, from 48 percent in Q1.”
Schumacher also tackled Unilever’s sustainability strategy head-on.
Former CEO Jope frequently came under fire from shareholders for putting sustainability over profit, and it’s clear that Schumacher wants to reprioritize the company’s goals.
On his watch, Unilever will sharpen its sustainability agenda and focus on fewer goals.
Sustainability, he said, is an “important differentiating strength for our business, and it will continue under my tenure. It’s important that we focus our efforts more on our big priorities, like reducing greenhouse gas emissions; our plastic packaging footprint; and protecting and restoring nature. These are the areas where we can have the most positive and differentiating impact,” Schumacher said.
All of those ideas are just a taste of what’s to come as Schumacher plans to lay out his full strategy during the third-quarter results presentation in October.
But it was enough to boost the share price, which closed up nearly 5 percent at 42 pounds on the London Stock Exchange.
Between now and October the new CEO told analysts that he will “continue to listen and to learn. But I’m already clear that we need to move with pace as we set the plans that will help to unlock the potential of this business. I will work with my executive team — and beyond — to agree the actions required to raise our game.”
Schumacher began his career at Unilever, in the financial department, and has previously worked at companies including H.J. Heinz, where he spent 10 years and oversaw the restructuring of that company in Asia Pacific.
He was named a non-executive director of Unilever in 2022, and was appointed CEO earlier this year. As reported, he will earn a base salary of 1.85 million euros, and be entitled to annual bonus and shareholder awards.
Schumacher addressed analysts following the release of the first half results.
In the first half, sales in the beauty and well-being division rose 8.6 percent to 6.2 billion euros while personal care was up 7.3 percent to 6.9 billion euros compared with the corresponding period last year.
The company noted that the prestige beauty and health and well-being brands delivered further volume-led, double-digit growth.
In prestige, Paula’s Choice, Dermalogica and Hourglass delivered “strong” growth supported by new, research-backed product launches, such as Dermalogica’s Phyto Nature Oxygen Cream.
In health and well-being, Unilever said that Liquid I.V. continued to perform well. The company has recently launched three sugar-free variants of its hydration technology “without compromise on flavor or function.”
Cost inflation has been a major driver of price and sales increases since the pandemic, but Unilever reiterated that the trend is slowing. Cost inflation — with a few exceptions — is on a downward trajectory.
Unilever said its expectation for net material inflation for 2023 is around 2 billion euros, of which 0.4 billion euros is anticipated in the second half with sales volumes recovering as the months go on.
Going forward, Schumacher noted that there would continue to be “pockets of high volatility and fluctuations in grain and food pricing” due to droughts and the war in Ukraine, but the overall trend is positive.
Unilever’s net profit for the half year rose 20.7 percent to 3.9 billion euros, bolstered partly by disposals. Most recently, it sold the Suave brand in the U.S. Last year, it sold the tea division to CVC Capital Partners Fund VIII.
The company said it is expecting underlying sales growth for the full year to be “above 5 percent,” which is ahead of its multiyear range.
The company said it’s expecting a “modest improvement” in underlying operating margin for the full year, reflecting higher gross margin and increased investment behind its brands.
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