Unilever cuts 1,500 managers after challenging first half of the year.

• Unilever plans to eliminate approximately 1,500 management positions and restructure its operations to concentrate on five key product categories.
• The company is attempting to increase growth following an unsuccessful acquisition and with the help of an activist investor to pacify.
• Dove soap and Magnum ice cream manufacturer, with a global workforce of approximately 149,000 employees, announced its focus on beauty and wellbeing, personal care, home care, nutrition, and ice cream.

The company plans to eliminate approximately 1,500 management positions and refocus its operations on five key product categories in an effort to stimulate growth following a failed acquisition and to satisfy an activist investor.

On Tuesday, the company that produces Dove soap and Magnum ice cream announced its focus on beauty and wellbeing, personal care, home care, nutrition, and ice cream.

Unilever's move, which was announced after a year of planning, mirrors a similar reshaping by a rival three years ago, during which activist investor Nelson Peltz's Trian Partners also held a stake.

Unilever CEO Alan Jope stated that by organizing into five category-centric business groups, the company would be better equipped to respond to consumer and market trends, with clear accountability for performance.

Last week, Unilever abandoned plans to buy a consumer health-care business for 50 billion pounds ($67 billion) after their shares fell by about a quarter from their record high in 2019.

GSK rejected its proposal, which was widely criticized by investors as a costly and risky distraction from addressing pressing business challenges, such as surging inflation in emerging markets and weakness in healthy foods.

Unilever has been reported to have a stake built in it by Trian Partners, though Trian has not confirmed this.

Trian aimed to enhance Tide detergent maker's declining market share, stagnant organic sales growth, outdated brands, bureaucracy, and excessive structural costs. Additionally, Peltz advocated for P&G to adopt a similar business structure to Unilever's new plan, which involved restructuring into fewer units.

Peltz's success at P&G may inspire him to apply the same strategy to Unilever, as the company's stock price has nearly doubled since Trian first invested.

However, there may be no quick fix.

Tineke Frikkee, a fund manager at Unilever investor Waverton Investment Management, stated that since Unilever operates in various product categories, it is uncertain if the same strategy will be effective in achieving growth and over what time frame. Typically, this process takes years rather than months.

Poor performance

Next month, Unilever is predicted to report a decrease in full-year net income due to the pandemic's impact on raw material, labor, and transport costs. Additionally, its exposure to specific foods and emerging markets, where inflation is increasing rapidly, has put it at a disadvantage compared to competitors P&G and Nestle.

Unilever's poor performance has caused frustration among investors, prompting British fund manager Terry Smith to criticize the company in a letter to his Fundsmith investors. Smith called the lost GSK deal a "near-death experience" and urged management to focus on improving their performance.

Smith wrote that Unilever management's reaction to its poor performance has been to say empty words, followed by major mergers and acquisitions.

Ramsey Baghdadi, a GlobalData analyst, advised Unilever to concentrate on enhancing its existing product lines and expanding its customer base, rather than expanding into new industries, such as healthcare, as demonstrated by the GSK bid.

Although Unilever began as a small soap business in 1880s Britain, the company did not anticipate that factory workers would be affected by its restructuring. However, there will be a 15% reduction in senior management roles and a 5% reduction in junior management roles.

Although the current news is not directly related to the company's failed GSK offer, the timing is unfortunate," said Sean Moran, a restructuring specialist at law firm Shakespeare Martineau. "When a business's confidence is low, drastic decisions often have to be made.