What Unilever's Plastic Pledge Means for Investors

Unilever (UL 0.19%) (UN), the massive multinational conglomerate behind brands from Dove ice cream and Hellman's mayonnaise to Axe body spray and Dove soap, wants to do more to save the environment: On Monday, it announced its intention to slash by 50% the amount of non-recycled plastic it uses by 2025. Given how much packaging Unilever uses, that's going to be a heavy lift.

In this segment of the MarketFoolery podcast, host Chris Hill and senior analyst Seth Jayson discuss not just the why, but the how. What other investable companies might Unilever tap to help it find innovative solutions to its plastic waste problem? How will other players in the space respond? And is there profit to be had in this type of move for companies that do it right?

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This video was recorded on Oct. 7, 2019.

Chris Hill: we're going to start with Unilever, the consumer-goods giant. Unilever announced it is pledging to cut its use of new plastics by 2025. Unilever is one of those companies that I'm sure a lot of people, they hear the name, they may not be familiar with it; chances are you've got Unilever products in your home.

Seth Jayson: What do your armpits smell like? Probably their soap.

Hill: Dove, Comfort, Dior, Hellmann's mayonnaise, my personal favorite, Colman's mustard. I like a spicy mustard now and then.

Jayson: It's weird that they have the food combined with the soap. But hey, good for them.

Hill: The point being, this is a $130 billion company and they've got over 400 brands. It's no small thing now for them to make this announcement.

Jayson: To say, "Hey, less plastic," which is very interesting. I applaud that! [claps] Do they sell any plastic little water bottles that drive me crazy? When I go running, all the plastic garbage I see is people hydrating. Visualize my finger quotes. Just bring a reusable bottle! No, this is interesting news. I think it's long overdue. Although one of the weird things about the plastic that gets headlines, like the Pacific garbage patch, the thing we're all so concerned about -- you know, it's half fishing nets? And the majority of the rest is other fishing stuff. So, this is a great step, but I think that most plastic, at least in non-developing countries actually ends up where it should, in landfills and so forth. Now, you can argue, should we be burning this stuff, or whatever. But this is a good step.

One of the places I think you can look for an investment story in this, if you are interested in playing it as a trend, is to take AptarGroup, ATR. It may sound counterintuitive, because they sell a lot of shampoo bottles and things like that, but they're also real innovators in packaging. We can't just get rid of all of our packaging entirely. Any solutions are going to require some innovation. Probably nobody in the packaging biz does a better job of coming up with new, interesting, and effective ways to ship and distribute stuff than AptarGroup. So, I would keep an eye on that company.

Hill: It's interesting to think about the ripple effects of this. You just hit on, from an investing standpoint, maybe the more important one. It's like, OK, they're going to cut plastics. Stuff has to get put in something, so someone is going to fill that void. We've gotten questions over the years about, "As Amazon and others ship more and more cardboard boxes, who's making the cardboard? It seems like there's an investing opportunity there." I'm also curious about a company like Procter & Gamble, which is a consumer goods giant like Unilever, only it's giant-er. It's about a $300 billion company. To the extent they feel pressure, or just decide on their own, "This is a move we would like to make."

Jayson: This is cross-industry, cross-sector. Tesco, for instance, in the U.K., is looking at getting rid of a lot of plastic. A lot of companies are. If you do this the right way, you can cut costs, and you can probably keep your consumer prices the same. But if you paid a nickel less for packaging, then you're pocketing a nickel more in profit. Tesco in the U.K. is doing that, of course, because there's some policy that's going to force them to pay up for excess plastic use. Those are other places to look for a pin action from a movement like this. P&G, I saw that for a couple of years now, they've been doing what's really a gimmick, but it could have some potential. They're using actually ocean plastic, reusable ocean plastic, renewed ocean plastic, to make some bottles.

The primary problem with this entire situation is "we." We're all it. We have to have brand new, shiny, pretty plastic. We can't buy something in a plain brown cardboard box, recyclable cardboard. We have to have the shiny stuff. To the extent that changes, that'll be good news not only for the environment, but for all of us as consumers. We really don't need to spend so much on packaging. Amazon has been doing more to send less packaging. Obviously, that's a big cost for them. Luckily, price is still a lever in this situation. As companies realize, "Hey, we can probably do this and spend less money if we plan it carefully," we'll see more of it.

Hill: One other ripple effect at least to keep an eye on is the hotel industry.

Jayson: Oh, yeah, a lot of them are getting rid of the bottles, which makes total sense. Nobody uses that bottle. And really, it's just something your mother-in-law takes and puts in her purse.

Hill: [laughs] Don't bring my mother in law into this.