Unilever's big spring clean
Management changes set stage for succession battle at Anglo-Dutch giant. By Danny Fortson
Friday 29 February 2008
Unilever turned another corner in its long road back to health yesterday when the maker of Vaseline and Hellmann's mayonnaise unveiled an executive reshuffle and consolidated two major divisions as part of its never-ending effort to streamline an unwieldy stable of personal care and food products.
The changes, which come nearly four years since chief executive Patrick Cescau instituted the "One Unilever" programme that has led to a cull of about 30,000 jobs and a raft of business divestments, were billed by the company as the last major structural change under a strategy aimed at getting the company back to an equal footing with rivals such as Reckitt Benckiser and Procter & Gamble. The changing of the guard also sets the stage for the succession tussle likely to come.
Out go a pair of long-serving veterans and the only executive board directors apart from Mr Cescau. Kees van der Graaf, the president of the group's European arm, who spent 32 years at the company, and Ralph Kugler, who rose to president of the home and personal care division after 29 years at the Anglo-Dutch giant, will both leave in May.
In comes Doug Baillie, who has run the company's Indian business for the past two years but will now join the board and take over as chief executive of Western Europe. The business run by Mr Kugler, responsible for Domestos cleaner and Dove soap, will be consolidated into an enlarged single unit with the foods subsidiary and will be run by Vindi Banga. Harish Manwani, head of Asia and Africa, will also be given a larger remit after the company decided to carve out the rapidly growing eastern and central Europe business units and lump it with the rest of its developing world businesses.
Mr Cescau, 59, said the moves, "build naturally on the changes of recent years and give us an organisational structure even better placed to advance our growth agenda". He has given no indication that he intends to retire, but analysts said that the promotion to the board of Mr Baillie, who ran the business in South Africa before moving to India, puts him in pole position.
"I would be surprised if he's not the main man for that job," said Ian Kellett at Numis Securities. "It would take a lot to beat him out for it." The chief financial officer, James Lawrence, will be proposed as the other new executive director.
Mr Cescau has been lauded by the City for his efforts in stripping out layers of management and selling businesses that did not fit into its jigsaw of products. But even if the company is no longer buffeted by disgruntled shareholders baying for a break-up, analysts believe there is still much room for improvement. "They have still got some way to go before they are best in class," said Julian Hardwick, of ABN Amro.
The company to beat in the sector remains Reckitt Benckiser, maker of Cillit Bang cleaner. Driven by the intensely focused chief executive, Bart Becht, the company has spurned the conglomerate model and instead carved out several profitable niches such as dishwashing tablets and household cleaners. The strategy has worked well. Its shares have increased nearly threefold in the past five years, while Unilever's stock has increased by about 45 per cent.
Unilever argues tirelessly that its strategy can be explained very simply as a reflection of shoppers' habits. In other words, because anyone going to the supermarket will buy food, household goods, personal hygiene products and the rest in one go, Unilever says it is right to stick to its wide-ranging basket of products that means it is able to pocket a disproportionate chunk of the average supermarket bill.
Mr Cescau has been turning the Unilever ship around for several years now and has made real progress. Yet the market remains weary of companies that emit even a whiff of conglomerate, so complacent is something he cannot afford to be, especially with a new crop of hungry executives in waiting.
Reaching far into the home
Like many conglomerates, Unilever is everywhere and nowhere. Most people will be familiar with the name, but few will have an awareness of the just how far the company's tentacles reach. But if you brush your teeth with Close-up toothpaste after a piece of toast slathered in Marmite and a cup of PG Tips tea, your money is all going to one place: Unilever. Odds are good that you will have more than a handful of Unilever products lurking in your home. That anonymous ubiquity helped it bring in more than £40bn in revenue in the past year. Such a far reach isn't always helpful. A couple of years back the company was hit by slowing sales of its Slim-Fast diet shakes after the Atkins diet craze took hold in America.
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