Unilever’s strategic direction
Following the unification of Unilever, the Board has undertaken an extensive process to review strategic pathways to reposition Unilever’s portfolio into higher growth categories.
This concluded that Unilever’s future strategic direction lies in materially expanding its presence in Health, Beauty, and Hygiene. These categories offer higher rates of sustainable market growth, with significant opportunities to drive growth through investment and innovation, and by leveraging Unilever’s strong presence in emerging markets.
The Board also concluded that major acquisitions should be accompanied by the accelerated divestment of intrinsically lower growth brands and businesses. This would provide funding and enable separation dis-synergies to be offset by acquisition synergies.
Unilever is committed to strict financial discipline to ensure that acquisitions create value for shareholders. The company benefits from a strong balance sheet and cash generation, and remains committed to maintaining an A-band credit rating. Following any acquisition, the company would target a return to current levels of gearing over the short to medium term.
Consumer Health is an attractive strategic option
Consumer Health is a highly complementary category for Unilever, with good potential for synergies and a number of routes to build scale.
GSK Consumer Healthcare would be a strong strategic fit. 45% of GSK Consumer Healthcare is in Oral Care and VMS – categories in which Unilever already has presence and substantial capabilities. OTC would be an attractive adjacent category, with the ability to combine Unilever’s consumer and branding expertise with GSK Consumer Health’s technical OTC capabilities. The acquisition would create scale and a growth platform for the combined portfolio in the US, China, and India, with further opportunities in other emerging markets.
We believe that this would be an attractive and synergistic combination for the shareholders of Unilever, which would also deliver value and certainty for the shareholders of GSK and Pfizer.
Accelerating operating performance
As well as addressing its long-term strategic direction, Unilever has been focused on accelerating growth within the existing business. A series of initiatives have been implemented to enhance operating performance. These include increased focus on operational excellence to improve market competitiveness, and aligning resources to five clear strategic choices. We have also strengthened our portfolio through the establishment of fast-growing new businesses of scale in Prestige Beauty and Functional Nutrition, and the divestment of Spreads and Tea.
Later this month we will announce a major initiative to enhance our performance. After a comprehensive review of our organisation structure, we intend to move away from our existing matrix to an operating model that will drive greater agility, improve category focus, and strengthen accountability.
During 2021 we started to see the results of the operational initiatives in our growth momentum, despite the challenges in our markets posed by the Covid pandemic. At the trading update in October, Unilever reported Q3 YTD growth at its fastest rate for eight years. We will update on our performance for Q4, and the full year, on February 10th.
The management and Board of Unilever remain focused on continuing to build momentum across the business and reshaping the company for a strong and sustainable future.