Unilever “must be broken up to avoid mediocrity” Business

Unilever bosses should break up the company before an activist forces their hand, analysts said as they warned the owner of Ben & Jerry’s is “going back to mediocrity repeatedly”.

Bruno Monteyne, an analyst at AllianceBernstein, the asset manager, suggested Unilever could be a “perennial turnaround case” without major change.

He said one way to create value would be to split the business into “smaller” and “more cohesive” businesses, with one in home care, another in personal care and beauty, and a third in food. This would separate brands such as Marmite and Ben & Jerry’s from Dove soap and Comfort fabric softener.

In January, Unilever revealed plans to cut 1,500 management positions and split the business into five divisions after it drew anger from shareholders over its failed £50bn bid for the healthcare division of GlaxoSmithKline.

However, executives are facing growing pressure to go further in a reshuffle, as analysts have raised concerns that attempts to turn Unilever’s business around and accelerate growth are “still failing”.

Mr Monteyne said: “If we don’t want this latest effort to be wasted, we need to address the structural and/or cultural issues that have caused Unilever to revert to mediocrity on several occasions.

“A more drastic and potentially effective change could be to recognize that there is no one size fits all when it comes to culture at Unilever.”

Unilever is struggling to restructure the business and rekindle growth after it emerged billionaire activist investor Nelson Peltz took a stake in the company earlier this year. Mr. Peltz’s investment firm, Trian Partners, has not yet made any requests to Unilever management.

But Mr Monteyne warned: “Unilever should not wait for an activist to appear on the shareholder register to make drastic changes. Rethinking the corporate structure and dividing the company into more agile divisions would accelerate the process of change they have started.

It comes amid growing shareholder frustration at Unilever, whose share price has fallen 8% since the start of the year.