Discontent at Unilever | FinancialTimes

This is an audio transcription of the FT press briefing podcast episode: Discontent at Unilever

Marc Filipino
Hello from the Financial Times. Today is Monday, January 24, and it’s your FT News Briefing.

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Google faces another challenge in Europe and Sony is trying to make its way into the electric vehicle market. Additionally, one of Unilever’s most prominent investors has derided the consumer goods company for trying to appear socially responsible.

Harriet Agnew
He said any company that feels it has to define the purpose of Hellmann mayonnaise has lost track.

Marc Filipino
It’s Harriet Agnew from the FT. She has the final chapter of this corporate drama. I’m Marc Filippino, and here’s the news you need to start your day.

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Today, Germany’s biggest publishers and advertisers are filing a complaint with the EU over Google’s plan to remove third-party cookies from its Chrome browser. The move would prevent publishers and others from analyzing user preferences as they browse. It would be a blow to the way the industry makes money. Industry associations representing big players like Axel Springer say Google’s move would breach EU law. Google said other platforms and browsers have already stopped supporting third-party cookies. Google says it’s the only one doing this openly and in consultation with stakeholders. This latest challenge to Google comes as new Big Tech rules are set to roll out across the EU, and officials are already concerned that Google is abusing its dominant position.

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The drama at Unilever continues to unfold. This weekend, the FT learned that hedge fund Trian Partners had taken a stake in the consumer goods company. Unilever owns hundreds of global brands, including Dove soap and Ben & Jerry’s ice cream. Trian is run by fearsome activist investor Nelson Peltz. He is known for buying a huge stake in Unilever rival Procter & Gamble and pushing for changes at that company. Its stake in Unilever comes at a critical time, the company is in crisis. Investors are divided on the direction of the company. They are furious after discovering a failed takeover attempt. And one influential investor publicly mocked the company’s ESG branding; his name is Terry Smith.

Harriet Agnew
He’s one of Unilever’s 13th largest shareholders, and he’s a very outspoken fund manager, he’s basically used his annual letter to investors to focus on the business.

Marc Filipino
That’s our asset management correspondent, Harriet Agnew. She followed the drama.

Harriet Agnew
His main argument was that Unilever had lost the plot, he said, by focusing on sustainability. He criticized management because he said they enjoyed the polishing of his enduring credentials at the expense of company management.

Marc Filipino
OK, so Terry Smith was clearly critical of Unilever’s efforts to portray themselves as a socially responsible company. Harriet, according to Terry Smith, what should Unilever’s plot be?

Harriet Agnew
So someone like Terry Smith thinks Unilever should focus on improving the profitability of the existing business rather than massive deals. And I think that’s something that other investors agree with. There are also those who think Unilever may be too tied to being a huge corporate giant. They think he should sell off his food business, maybe, and other businesses that are sort of growing x and maybe just temper his ambitions and shake up the wallet a bit.

Marc Filipino
OK, so is Unilever at fault here or does Terry Smith just have his own personal interests in mind?

Harriet Agnew
Look, Unilever has underperformed its peers, so I think there are big questions surrounding its financial performance. I think all of this will add to the pressure on general manager Alan Jope. And really for the company, I think this marks the biggest crisis since it fought off a hostile approach from Kraft Heinz five years ago.

Marc Filipino
So Harriet, how did Unilever CEO Alan Jope react to all of this? And by all of this, I’m not just talking about Terry Smith’s comments. I’m also talking about Unilever’s failed bid to buy GlaxoSmithKline’s consumer healthcare unit.

Harriet Agnew
He responded by saying he wanted to do business in consumer health, so even if they don’t get this GSK division, which looks like this, this deal is dead anyway, he said that they wanted to develop in health and beauty and in hygiene. He promised this new organizational structure and some sort of major new strategic initiative, which will be announced in the coming weeks. So I think a lot depends on that and investors will continue to give it the benefit of the doubt.

Marc Filipino
Now, that could change now that Nelson Peltz and Trian Partners are on the scene. But Harriet, before I let you go, can we please go back to mayonnaise for a second and Terry Smith’s attack on Jope referring to Hellmann’s mayonnaise as having a purpose. Do you know, Smith is right about that?

Harriet Agnew
I think this fits into a larger debate around ESG and whether running a business sustainably actually leads to superior financial performance. I think not all investors agree that Unilever is underperforming because it focuses too much on ESG. You know, a lot of people will say their problems are with being in low-growth categories in mature markets. I think what I liked to see and what resonated with a lot of readers is just somebody kind of calling out the whole ESG movement and kind of calling their bluff because ESG, I mean, one, it covers kind of a multitude of areas in environmental versus social versus governance — three very different things. Sure, it’s a force for good, but there’s also a lot of growth in this area, and it’s a great marketing tool for companies and for fundraising investors. And so I think that really resonated with the people that Terry kind of called that.

Marc Filipino
Harriet Agnew is the FT’s asset management correspondent. Thanks Harriet.

Harriet Agnew
Thank you.

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Marc Filipino
Sony is jumping on the electric vehicle bandwagon. Earlier this month, the company rolled out a prototype electric SUV and announced the launch of a new company to explore entering the electric vehicle market. But Leo Lewis, the FT’s Asia editor, says Sony doesn’t necessarily want to make cars.

Leo Lewis
Sony’s real interest here is in becoming the kind of backbone of components in the electric car market. And what I think Sony is doing here and what a lot of the analysts we’ve talked to think is happening here is that Sony has realized that the best way to demonstrate the validity of its products, which are electronics, entertainment electronics, software platforms and so on, that will work in a car, which is, of course, a very different environment for electronics than your pocket or your bag or whatever that is. You know, these are electronics in cars of a very different kind, really, than just consumer electronics. They have to withstand temperatures and they have to be proven to have very high safety standards and so on. Sony needs to prove it can make these things for the EV market. And the best way to do that, in Sony’s judgment, is to produce a car and demonstrate very clearly that its components are, you know, top of the line and work brilliantly in an electric vehicle.

Marc Filipino
And Sony could have a little fun mixing its movie soundtracks into the car’s electronics for an entertaining driving experience.

Leo Lewis
If you miss the sound of, I guess, a hoarse combustion engine when you put your foot down, I think the idea is that they’ll link a similar (inaudible) noise, you know, if you wanted movie sounds particular you liked and wanted Spider-Man, you know, his web being thrown every time you hit the gas or you wanted Thor’s hammer to come down every time you hit the brake, c is probably something you could install. So Sony, as a company, is obviously looking to put as many, I think, entertaining and innovative ideas into its car in hopes that automakers will look at this as the future and decide, yeah, listen, Sony is a legitimate player in this tens of billions of dollars global automotive market. This is a company we want to partner with.

Marc Filipino
Leo Lewis is the FT’s Asia business editor.

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You can read more about all these stories on FT.com. This has been your daily press briefing on FT. Be sure to check back tomorrow for the latest trade news.

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