Jeremy Warner's Outlook: Unilever's Cescau seeks path back to growth

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The Independent Online

When Niall FitzGerald gave his first interviews, all bright-eyed and bushy tailed, as co-chairman of Unilever eight years ago, he spoke boldly of transforming the Anglo-Dutch foods to detergents giant from the sluggish supertanker it was widely seen as into a fleet of fast-moving frigates, all sailing together but independently of one another so as to encourage innovation and endeavour.

Though he achieved much, he never succeeded in that ambition, and with the supertanker now becalmed while Procter & Gamble forges ahead at an ever greater rate of knots, it falls to his successor, Patrick Cescau, to try to fix the engine. Following the changes announced yesterday, Mr Cescau does at least have full control of the bridge, even if his former co-chairman, Anthony Burgmans, still hovers around in the background, waiting to grab the wheel at the slightest opportunity.

Yesterday's management and structural changes ought eventually to do some good. In the meantime Mr Cescau has wisely reduced his targets for free cash flow and sales growth to less challenging proportions. But although there is now just one chief executive and one chain of command, which ought to lead to greater accountability and speed of decision making, Unilever surely needs a great deal more just to keep pace with competitors let alone close the gap.

The Path to Growth strategy of recent years has turned out to be a path to nowhere. Sales growth for last year as a whole sank to zero, and though there was a decent recovery in the final quarter, this was only achieved at devastating cost to profits. Taking account of write-offs on Slim-Fast and other exceptionals, Unilever was in loss in the final quarter for the first time since its last big restructuring.

Mr Cescau gave as full and frank an analysis of Unilever's failings yesterday as I've ever seen from one of the giants of the European corporate stage. It was, for instance, a far more humbling mea culpa than we've seen from Shell, which has yet fully to rid itself of the complacent arrogance of its past. Yet the problem that Mr Cescau has got is that he was a member of the management team that set out on the Path to Growth, and as a consequence he looks as much lost in the woods as any.

I'm not sure an insider is ever really capable of bringing about the root and branch cultural change companies facing hugely altered circumstances need. Still, investors seem prepared to give him the benefit of the doubt. Just to get this in perspective, Unilever is not yet in a state of crisis. The company's market leading positions across a large number of brands are so entrenched that it would have to do something truly negligent to face anything close to shipwreck.

Fat dividends and share buy-backs remain affordable. In these circumstances, the market is prepared to forgive a lot. Yet once the slide begins, it tends to be extraordinarily difficult to halt. Admittedly it is a much smaller company, but the contrast with Reckitt Benckiser, 40 per cent of whose sales come from products launched in the last three years, could scarcely be greater. Unilever now accepts the case for a unitary corporate structure, possibly extending eventually to a single share listing and headquarters, but it doesn't yet see anything wrong with combining food and personal care products in the same company. Both of Unilever's more successful competitors, Nestlé and Procter & Gamble, are either one thing or the other. This ought to tell Mr Cescau something.

Watchdog gagged

Along with the law and medicine, accountancy remains one of the last bastions of self regulation in Britain. I hesitate to argue the case for bringing the profession into the fold of statutory regulation, but Deloitte & Touche's action in issuing an injunction against the Joint Disciplinary Scheme (JDS) has driven the last nail into the coffin of this discredited system and makes eventual FSA regulation all but inevitable. The rest of the profession will not be thanking Deloitte's for so vigorously defending its corner.

It is now nearly 10 years since the events complained of at Capital Corporation, a casinos company which was long ago subsumed into something else. Gone too is the main cause of the mischief, Capital Corporation's chairman, Garry Nesbitt. He died last year, taking with him to the grave the truth or otherwise of allegations that a large part of the company's stock of fine wines found its way into his own personal cellar.

That it has taken the JDS as long as this to get to the bottom of the affair and issue a formal letter of complaint - well nearly anyway - is cause enough for concern. That Deloittes, in the midst of bidding for work for the deregulating gaming industry and therefore keen to emerge without a stain on its character, should find it acceptable or even possible to gag the ruling authority is stranger still. There's too little choice and too much power concentrated in the big four accounting practices. It's time they were reined in and brought to book.

ERM/Railtrack

My, is the Information Commissioner, Richard Thomas, going to be a busy fellow. One of the first things on his plate under the new Freedom of Information Act is to adjudicate on just why it was possible to publish extensive Treasury documentation on Britain's exit from the ERM while material concerning Stephen Byers' decision to declare Railtrack insolvent is deemed by the Department of Transport as too expensive to put on its website.

In the absence of a better explanation, the public is entitled to take the cynical view - that it suits the Government to a T in the run-up to the election to remind the world what a shambles economic policy became under the last Tory administration, but that it would cause too much damage to the political rehabilitation of Stephen Byers also to remind us what a disaster he was as secretary of state.

The Department of Transport might have claimed that in view of the fact that Railtrack's administration is still the subject of litigation, it would be sub judice to publish. It might even have claimed commercial confidentiality, though this would have been harder given that Railtrack is now dead and buried. But to use the excuse of cost, given the hundreds of man hours that must have been applied at the Treasury to deciding what should and what should not be published about the ERM, then sanitising the material that was, looks plain disingenuous.

As for Mr Byers, it is quite obvious that he's already being lined up for a seat back in the Cabinet after the next election. He's being used by the Prime Minister as the political outrider for all manner of weird and wonderful initiatives from climate change to the totally crackpot idea that school applications be brought forward a year so as to promote the good schools and weed out the bad ones.

Mr Byers was an extraordinarily bad minister, both at the Department of Transport, which descended into a state of near chaos under his watch, and at the Department of Trade and Industry, where his capricious and unreliable decision making went unnoticed outside the business pages only because the DTI is such a backwater of government.

It will no doubt help his cause that the Department of Transport has decided to "bury the bad news", but we already largely know the truth. If Alastair Campbell can make a comeback, so can old "pants on fire".

Milestone for shares

So we've finally got back to 5,000. This is admittedly still 28 per cent below the peak the FTSE 100 achieved five years ago, but is still a remarkable rally from the depths the market sunk to immediately prior to the Iraq war. How much further can it go? The consensus opinion for this year was that the FTSE would go sideways, so the consensus nearly always being wrong, it was reasonable to assume shares would surprise either on the downside or the upside. It's still early days, but fingers crossed, it looks very much like being the upside. One note of caution. Beware what happens the other side of the election, when an awful lot of chickens will be coming home to roost.

jeremy.warner@independent.co.uk

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