OUTLOOK: Unilever's Cescau seeks path back to growth

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 moving 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 the background, waiting to grab the wheel given the slightest opportunity.

The structural changes announced yesterday ought over time 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 more even 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 writeoffs 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 changed 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 ship wreck.

For the time being, 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, Nestle and Procter & Gamble, are either one thing or the other. This ought to tell Mr Cescau something.

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