Everybody has opinions, but very few have the ability to act on their beliefs the way that a CEO can. That's why leadership change is so important in public companies, particularly if you own stock in the company in question.
Unilever (UL 0.63%) just installed a new CEO. He highlighted three really important positives for investors to take note of regarding this multinational consumer packaged goods company.
A lot has changed at Unilever
It wasn't all that long ago that Unilever had an unusual dual listing structure that caused investors to discount the stock. A CEO change, bringing in Alan Jope, was part of the process to get rid of that impediment. At around the same time, the company was working to shift out of slower-growing businesses and into faster-growing ones. Asset sales and acquisitions were all part of that equation.
Jope also faced the pandemic, which upended so many parts of the economy. And then a dissident investor got involved, which further complicated the business. The end result was a focus on streamlining operations in an effort to cut costs and improve business-level performance. To say that Jope's time at the head of Unilever was eventful is probably an understatement.
Jope recently stepped down from the CEO post and was replaced by Hein Schumacher. Schumacher has worked for Dutch multinational retailer Royal Ahold, Heinz food processing company, and was last seen in the CEO role at Dutch multinational dairy cooperative Royal FrieslandCampina. He has ample experience operating in global markets and has been on the board of directors of Unilever since October 2022, basically getting to know the company from the top down. Now he is getting to know it from the bottom up.
Three things Schumacher likes a lot
There are clearly things that the new CEO wants to do now that he has the reins. But for investors, the bigger takeaway from his first conference call should probably be what he isn't planning to change.
First, after meeting with leaders from the company's top markets, the United States, India, and China, and spending some time with the research and development teams, Schumacher is confident in the leadership team he inherited. That doesn't mean there won't be changes, but overall, the company's top brass seems sound. This is not a small thing, given the management overhaul that was undertaken by Jope. Notably, what the new CEO didn't say was that the effort to increase accountability and agility needed a lot more work. So it seems that the company's efforts to streamline moved in the right direction.
The second big takeaway for investors is the new CEO's thoughts on the company's brand portfolio. He described it as "fantastic." While that might be a bit of hyperbole, Unilever does own some very attractive consumer staples brands, including Dove, Hellmann's, Ben & Jerry's, Knorr, and Axe, among many others that you likely know, and may even use. This has long been a strong suit for Unilever, but with the sale of some slower-growing businesses, like teas, and the addition of smaller brands with more growth potential, like Liquid I.V., it has a solid platform for growth today. There will always be change here, noting that the company just bought greek yogurt brand Yasso. But the heavy lifting under Jope left the company in the enviable position to focus on bolt-on deals for up-and-coming brands instead of a major portfolio overhaul.
And, third, there's the point that Schumacher made about Unilever's unique global reach. What's most notable is that around 60% of sales are tied to emerging markets. This is important because emerging markets are expected to expand more quickly than developed markets over time, positioning Unilever for solid long-term growth. The company's overall sales grew 7.9% in the second quarter while the emerging markets in its portfolio grew, on average, 10.6%. That's only one quarter, but it's a big difference.
The job is never done
Companies that have lasted as long as Unilever, which traces its history back to 1902, are always changing so they can keep up with the world around them. That's particularly true when it comes to consumer-facing operations, like consumer staples and food companies. So Unilever isn't suddenly a final product. But, relative to where Jope took over, it seems as though Schumacher's time at the helm will be driven more by business execution than business transformation, with a strong starting point of good leadership, good brands, and good markets. With a roughly 3.5% dividend yield, Unilever is probably fairly priced for long-term income investors.
