Nelson Peltz, owned guaranteed As a member of Unilever’s board, he must be tempted to use his seasoned playbook to revive a flagging consumer goods company. The American activist investor has earned accolades at food groups Heinz and Mondelez and, most relevantly, Unilever’s big U.S. counterpart, Procter & Gamble.
Peltz, through his New York hedge fund Trian, can claim previous success. Before P&G, Trian claimed to boost earnings per share at portfolio companies by 780 basis points per year, 880 basis points higher than the S&P 500 and 880 basis points higher than the S&P 500. While total returns during P&G’s tenure were lower than the U.S. stock market benchmark, they easily outperformed the consumer sub-index.
Unilever When Peltz first targeted the latter in 2017, it had many of P&G’s hallmarks. The maker of Pampers diapers and Tide laundry capsules is bloated, has struggled to grow, and is ceding market share to smaller, more innovative competitors. In the first quarter, Unilever’s own sales fell. Its traditional matrix management structure hinders accountability.
This matures Trian’s prescription, which is broadly in line with that of P&G’s incoming boss, to improve and speed up decision-making. As a result, investors pushed Unilever shares up 7%.
Two factors should help Peltz. One had a friendlier atmosphere than P&G, where he ended up winning a bitter proxy battle. In contrast, Unilever has attracted the activist despite a relatively low exposure rate of 1.5%. Controversy could arise, however, if the restructuring conflicts with Unilever’s vaunted ESG credentials.
Second, Unilever is already on its way. The maker of Dove shampoo and Hellmann mayonnaise is tearing down its intersecting geographic and category silos. It divided the company into five category-focused divisions and eliminated 15 percent of senior management positions. Each new group will be accountable for its strategy, growth and profitability.
However, Peltz couldn’t wave his wand, and the economy was trending against him. P&G doesn’t have to deal with huge input inflation or a cost of living crisis that jeopardizes sales. The market is not conducive to disposal. Unilever has a wider pantry and needs to clear the shelves.
Sophisticated consumer industry investors can help seal deals. Following GSK’s £50bn takeover of the consumer division, he had the opportunity to work productively with management eager to regain investor trust.
The Lex team is interested in hearing more from readers. Let us know what you think of Peltz’s prospects at Unilever in the comments section below.