Unilever is a £100billion company, one of the biggest beasts on the London stock market and the custodian of some of the best-loved brands in our shopping baskets, from Dove deodorants to Marmite spread.
But have its bosses gone off their trolley in their mania for ‘woke’ values?
Terry Smith, a leading fund manager and long-term shareholder in Unilever, thinks so. He used his annual letter to his own investors as the forum for an extraordinary broadside at the company’s top executives, accusing them of having ‘lost the plot’.
Unilever is a £100bn company, one of the biggest beasts on the London stock market and the custodian of some of the best-loved brands in our shopping baskets
Critics have been uneasy for several years about Unilever’s politically correct antics. At times, its posturing would have seemed more at home in an undergraduate common room than one of Britain’s premier boardrooms.
Most shareholders have kept their misgivings to themselves. ESG – environmental, social and governance – principles have become de rigueur in the City, and everyone is expected to conform to the new orthodoxy.
Smith didn’t get the memo and gave Unilever both barrels for its ‘ludicrous’ preoccupation with sustainability, inclusive beauty that recognises a range of body types as alluring, and other modish issues.
He launched his missile after a number of investors in his £29billion Fundsmith Equity fund contacted him to ask why he still holds shares in the consumer goods giant.
He accused Unilever of being obsessed with virtue-signalling ‘at the expense of focusing on the fundamentals of the business.’
It’s a variant on the theme of ‘go woke, go broke’. Although Unilever is nowhere near going under, Smith, 68, is concerned its posturing comes at too high a price.
The son of a bus driver from the East End of London, Smith is a pugilistic figure renowned for straight-talking and a stellar investment record.
He pointed to a public row over the refusal by Ben & Jerry’s, one of Unilever’s brands, to sell its ice cream in the ‘Occupied Palestinian Territory’ as one instance of bonkers woke behaviour.
But there are, he said, far more ‘ludicrous examples.’ Indeed so. The hipster US ice cream brand in 2020 meddled in British politics on Twitter, attacking Home Secretary Priti Patel over migrant boats crossing the Channel.
Fund manager Terry Smith (pictured) has accused Unilever’s top executives of having ‘lost the plot
‘Hey @PritiPatel, we think the real crisis is our lack of humanity for people fleeing war, climate change and torture,’ it tweeted.
Whatever one’s views on this topic, Unilever shareholders might think Ben & Jerry staff would be better off concentrating on sale of tubs of Vanilla Pecan Blondie.
As for Unilever’s other brands, you might, for instance, have thought that Knorr made humble stock cubes. Shame on you: the brand is ‘Reinventing food for humanity.’
The company website is a cornucopia of wind turbines, flying kites and hummingbirds, with slogans trumpeting: ‘We’re using our scale for good, we are Unilever.’
‘We believe a plant-forward diet can taste great,’ it chirrups. For the uninitiated, that means meals that emphasise, but are not limited to, plant-based foods.
Maybe you just wanted some Hellmann’s to smear on your BLT sarnie. Not so fast: you need to know that Richard Hellmann, the inventor of the mayonnaise, was ‘an immigrant man of the people’.
Phew! That should reassure the many customers who live in dread of salad dressing that might have been thought up by a long-dead white male oppressor.
When it comes to Dove, Unilever burbles that ‘we care about all women, female-identifying and non-binary people’, and wants to ‘redefine beauty standards’. The question for shareholders, though, is: does it sell more soap?
Here is the nub. None of it might matter much to Terry Smith and other investors if the woke manifesto went along with a good financial return.
Unfortunately, this has recently been far from the case as Unilever shares have fallen nearly 10 per cent in the past 12 months.
Admittedly, it has had to contend with the pandemic and inflation in the cost of raw materials, but the FTSE 100 giant still compares poorly with its peers.
Shares in US rival Procter & Gamble have risen more than 15 per cent in the same period and by more than 20 per cent at the Swiss multinational Nestlé.
Advocates of woke business claim that social responsibility goes hand in hand with a better bottom line in the long term.
Yet, as Russ Mould of stockbroker AJ Bell points out, Unilever has fallen short of its two main financial targets: for 3-5 per cent annual underlying sales growth and for an operating profit margin of 20 per cent.
‘There are extenuating circumstances, but the fact is, Unilever shares trade at a discount to its peers,’ he says.
‘Terry Smith raises some legitimate issues. In the end from a shareholder perspective it is dollars and cents.’
Unilever’s woke agenda took off in earnest under its former boss Paul Polman, 65.
After considering the priesthood as a young man, he opted instead to pursue secular sainthood at the helm of Unilever.
On being installed in the CEO’s office in 2009, Polman set about using the business as a vehicle for his moral mission.
Ben & Jerry’s, one of Unilever’s brands, refuses to sell its ice-cream in the ‘Occupied Palestinian Territory’
An arch-Remainer, his good works included a foundation for blind children in Africa and serving on the United Nations panel of ’eminent persons,’ along with Queen Rania of Jordan and Graca Machel, the widow of Nelson Mandela. He surfaced a couple of days ago in an interview, when he boasted about his ‘moral authority’.
He also denounced corporate greed at Kraft Heinz, the US giant, which made an unsuccessful £107billion takeover bid for Unilever in 2017.
Such were Polman’s connections in the world of rich and famous poseurs that Bono offered to write him a song to fend off the predator.
Perhaps it is not too tragic a loss to popular music that help from the U2 front man was not needed.
A love of sermonising did not prevent Polman from making around £70million during his decade at Unilever.
After seeing off Kraft Heinz, he and his colleagues provoked a major upset with shareholders when they hatched a plan to abandon the London share listing and to move its sole headquarters to Rotterdam.
The idea was eventually ditched and a new boss, 57-year-old Scotsman Alan Jope, was installed.
He has been an eager bearer of the flame. Pre-pandemic, Jope regaled the Cannes Lions International Festival of Creativity with his views on the dangers of ‘woke-washing’ or companies pretending to care about the environment and equality.
Under his command, Unilever misses no opportunity to tout its credentials as a corporate paragon. Yet Jope dislikes describing Unilever as a woke company, declaring instead that it is ‘driven by purpose’.
Since he has been at the helm, however, the shares have been dismal. The price is now not much different to when he took over.
The debate Smith has provoked is not entirely one-sided.
Society evolves, and companies need to adapt or risk alienating consumers and investors.
It is a brave boss these days who dares offend snowflake sensibilities. Ask Bill Michael, who was kicked out of his job as UK chair of audit firm KPMG after calling unconscious bias ‘crap’.
Unilever is far from the only FTSE giant facing this dilemma. The oil giants are in a similar predicament, struggling to conform with new environmental expectations and to satisfy investors’ need for profits and dividends.
Smith is holding on to his stake for now in the belief that Unilever’s brands are strong enough to triumph over the wokery of its senior executives.
But his patience and that of other shareholders may be wearing thin.
Unilever is starting to look like a target for a fresh takeover bid, perhaps even by rampant private equity barons.
No doubt the company is also being eyed beadily by activist investors with a view to taking a stake and agitating for the business to be broken up.
Jope, now into his third year in the job, needs to realise that ‘purpose’ is no substitute for performance.
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