The future of Unilever’s food business has been uncertain since the company restructured its operations under one roof in London back in 2020. This restructuring came at a time when it was evaluating various aspects of its extensive product line, which includes well-known brands such as Hellmann’s mayonnaise and Dove soap.
Recently, Chief Executive Officer Hein Schumacher announced significant changes aimed at refocusing the company's efforts on its strongest performing areas. Unilever plans to divest from food brands generating over €1 billion (about $1 billion) in sales. This strategic move is part of Schumacher's broader turnaround initiative to streamline the organization and seek growth primarily through its condiment and cooking aid products, as well as offerings catered to professional kitchens.
During an investor day held in London, Schumacher elaborated on these plans, emphasizing the need to expand the company's range of premium products. He referred to this approach as “premiumization,” which has become increasingly relevant as consumer behavior shifts, with buyers trading down from branded goods to store-label products amid rising living costs and inflation pressures.
According to recent reports, Unilever's food division posted total sales of approximately €13 billion last year, indicating considerable scale within its operations. Nevertheless, the aim is clear: the company is committed to enhancing its portfolio by focusing on premium items, particularly as consumers show caution with their spending (which makes sense, considering the rising prices of everyday goods).
Unilever's management has recognized the need to shift gears, especially after experiencing declining volume sales for several quarters. Schumacher reassured investors of the company’s new goals, stating, "The volume of products we sell will increase by at least 2% annually" as they navigate the separation of their ice cream business—a sector including iconic brands like Ben & Jerry’s. This step is expected to support their previously stated objective of achieving mid-single-digit sales growth as they regroup.
Interestingly, branded goods marketers like Unilever have faced increasing competition from supermarket chains offering their own private labels, which have been perceived by consumers as more affordable. Consequently, this has compelled many food producers to rethink their strategies—moving away from purely price-based sales tactics and instead focusing on the quality and uniqueness of their products.
Schumacher reiterated his confidence, particularly about Unilever's potential growth within the Indian market, calling India “perhaps our single biggest opportunity” due to its impressive economic resilience. He pledged, "We will pull all levers to make sure we benefit from this growth,” underscoring the company’s intention to capitalize on opportunities as they arise.
Testing the waters, Unilever has already returned to notable growth, with volumes rising by 3.6% during the third quarter of 2023, marking its first significant quarterly growth since 2021. This positive outcome highlights consumers’ gradual return to purchasing products amid Unilever's renewed strategic focus.
Schumacher's announcement of both the €800 million productivity initiative and the separation of the ice cream division is on track to be completed by late next year, as the company moves through this restructuring phase efficiently. Following these updates, Unilever's shares witnessed a rise of 2% on the London Stock Exchange and have reported growth of 21% over the past year.
The restructuring plan reflects broader trends within the food and consumer products industry, where companies are starting to recognize the importance of adaptability and focusing on key areas of strength. Unilever's decision to slim down its food arm confirms its commitment to be nimble and responsive to changing market demands, ensuring its continued relevance and competitive edge as consumers navigate new spending habits.
All eyes will be on how these plans translate during the upcoming fiscal cycles, but for now, Unilever seems poised to reclaim its position as one of the world’s leading consumer goods companies, with ambitious yet achievable targets on the horizon.
