BREAK WITH TRADITION CAN LIFT UNILEVER

How much influence does a chief executive exert over the fortunes of a company? It is a question that weighs heavy on the minds of investors in Unilever, the maker of Hellmann’s mayonnaise and Dove soap. It weighs because Unilever has a new chief executive, Paul Polman. There is extra interest because Mr Polman is the first external candidate to be appointed to this role at Unilever. It is, or was, a company that prided itself on its ability to breed its own leaders. Indeed, it bred leaders for plenty of other businesses, too.

Unilever’s reputation for internal management strength comforted investors. Too many companies are hurled from pillar to post by the whirlwind activities of new brooms that often sound good but signify less. In this case, however, many investors are welcoming Unilever’s decision to break with tradition. Fears are that Unilever had become stewed in its own corporate culture and there is hope that the new blood will bring a blast of fresh thinking.

New leaders always attract attention, but Mr Polman, who has been drafted in from Nestle, finds himself in especially bright limelight because comparisons are drawn, and will continue to be drawn, with Bart Becht, the head of Reckitt Benckiser. Reckitt is not only a Unilever rival, it is also one of the most consistently successful large UK-listed companies of the past decade. Many think that its success comes down to Mr Becht . . .

. . . So will Unilever do better with Mr Polman? The market took fright on Thursday when Unilever said that economic uncertainties meant that it would no longer be held to previous stated performance targets on sales and profit margins. The fright led to a 6 per cent drop in the share price. This does not mean that Unilever will miss the targets, of course, and it is only natural for Mr Polman to want to set his own agenda – it is, after all, what Unilever brought him in for. The bigger disappointment was that while Unilever said what it might not do, there was less said about how Mr Polman intends to make his mark.

Time may prove that Reckitt’s outsized returns have come at some as yet unrecognised risk and that Unilever’s more cautious style will be more robust. Doubts persist, but there seems to be more hope than fear in the Unilever story. Buy.

back to portfolio

%d bloggers like this: