Unilever to cut 1,500 jobs as investors increase pressure

The Marmite maker Unilever has announced plans to cut 1,500 management jobs globally, as it comes under mounting pressure from a US activist investor and other shareholders to improve its performance.

The FTSE 100 company, known for brands such as Dove soap, Hellmann’s mayonnaise and Ben & Jerry’s ice-cream, said it would reduce its senior management roles by 15% and more junior management posts by 5% as it takes out some layers to simplify the business, including in the UK. It will consult unions on the plans and stressed that shop floor workers in its factories would not be affected.

Unilever, headquartered in London, employs 149,000 people worldwide, including 6,000 in the UK and Ireland.

The chief executive, Alan Jope, has been under pressure for months to revive sales growth as the company missed its profit margin targets. In recent days it emerged that the US activist investor Nelson Peltz has built a stake in the company. Peltz has not said publicly what changes it is pushing for.

Jope had a tilt at GSK’s consumer health venture, but Unilever’s £50bn offer was rejected as too low by GSK and drew fury from shareholders, forcing the group to abandon its interest last week.

The outspoken fund manager Terry Smith, the founder of Fundsmith and one of Unilever’s top shareholders, described the failed offer as a “near-death experience” and said management should focus on improving its core business – or step down. He had previously declared that Unilever had “lost the plot”, accusing management of pursuing sustainability at the expense of business performance.

As the furore built, Unilever rushed out a strategy update on 17 January in which it promised to grow its health, beauty and hygiene business and sell slower-growing operations. When asked at the time whether the plan included job cuts, Jope said: “This is not driven by cost. We’ve seen tremendous step-ups in Unilever’s speed and agility during the pandemic.”

Unilever said on Tuesday the company would be reorganised around five areas: beauty & wellbeing, personal care, home care, nutrition and ice-cream. Each business group will be fully responsible for their strategy, growth, and profit delivery globally.

At the moment, its 400-plus brands operate in three divisions – beauty & personal care, foods & refreshment, and home care.

The shake-up will split the food business into two divisions, which could pave the way for a partial sale. “This new business model will likely make a major divestment easier,” said James Edwardes Jones, analyst at RBC Capital Markets. “The fact [that] ‘nutrition’ includes fast-growing food segments such as plant-based and healthy snacks perhaps moves the divestment focus on to the slower-moving ice cream category.”

“Our new organisational model has been developed over the last year and is designed to continue the step-up we are seeing in the performance of our business,” Jope said. “Moving to five category-focused business groups will enable us to be more responsive to consumer and channel trends, with crystal-clear accountability for delivery. Growth remains our top priority and these changes will underpin our pursuit of this.”

Unilever announced some new appointments to its leadership team. The changes include Nitin Paranjpe, the chief operating officer, taking on a new role as chief transformation officer and chief people officer.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The management team clearly want to show they are getting the house in order before embarking on another shopping spree, given how badly the bid was received.

“Shares rose initially on news of the clear-out, but have lost ground, with some investors not satisfied that cost cutting alone will be enough to ensure Unilever turns a corner. Customer loyalty is still a big asset for Unilever, and it’s been working to build a volume-led business, but with the cost of living squeeze intensifying there is a risk pricier products will struggle to shift. So clearly more clarity is being demanded about the direction ahead, and Alan Jope is still under pressure to come up with a brand new strategy.”

The shares were slightly lower at £39.40 on Tuesday afternoon. A year ago, they changed hands at £44.65.