Royal Dutch Shell Group .com

FINANCIAL TIMES: Unilever hopes to drive a big push for sales and clarity: “Its corporate shake-up was not nearly as far-reaching as Shell's...because its problems - a first-ever profits warning last year and a long period of dismal growth - were not on the scale of Shell's reserves debacle.” ( 11 Feb 05


By Henry Tricks and Sundeep Tucker

Published: February 11 2005


Unilever was doing its best yesterday to distance itself from any resemblance to its Anglo-Dutch cousin, Royal Dutch/Shell.


Its corporate shake-up was not nearly as far-reaching as Shell's, company insiders said, because its problems - a first-ever profits warning last year and a long period of dismal growth - were not on the scale of Shell's reserves debacle.


However, like Shell, Unilever's corporate overhaul yesterday left a burning question in investors' minds. Would it galvanise the business back to its former rude health, or end up being little more than an exercise in rearranging deckchairs?


"The company has done the minimum required to placate investor unease about the management structure," said Mark Webster, a fund manager at State Street Global Advisors, which owns 1.5 per cent of Unilever. "But there appears to be a lack of detail about how the company plans to drive sales growth."


According to Patrick Cescau, who becomes Unilever's first sole chief executive, the changes in the management structure unveiled yesterday are all about driving sales growth.


For a start, his position will make him the operational boss, with full responsibility for day-to-day performance, while his former co-chairman, Antony Burgmans, has been moved into a non-executive role.


Unilever has scrapped the existing senior management structure, including a cumbersome executive committee and 11 business groups, that Mr Cescau said hindered its ability to bring innovative goods to market.


It will be replaced by a seven-executive team reporting directly to him. Three directors, all close to 60, will be retiring, while the new management team incorporates what analysts call "rising stars" in their 40s and early 50s.


Two, the leaders of the food division, and the home and personal care division, will have sole responsibility for brands, including innovation, while three regional heads will be responsible for sales and marketing.


That, says David Lang, analyst at Investec, replicates a system that is common among consumer goods companies keen to drive the top line and strike a balance between local and global priorities. "It straightens out the structure and brings a new generation of management to the top," he says.


Other analysts hailed the reforms as an improvement on management clarity, but there was some disappointment that Mr Cescau gave no indication of when the benefits would show up in improved profits.


In his presentation, Mr Cescau issued a prolonged mea culpa on behalf of the company, especially regarding its ill-fated Path to Growth strategy that he acknowledged failed to produce growth.


He said the company had learned from that strategy not to issue too many targets.


"We boxed ourselves in," he said. "We wanted to be transparent. But in doing so we created a straitjacket for ourselves."


However, analysts and shareholders bemoaned the lack of any earnings guidance for 2005, and were given little sense of by how much Unilever planned to ramp up its advertising spending to increase sales - even though that would hit profit margins.


"People are focusing on the fact that it will take time. There is no visibility on how long it will take," said Julian Hardwick, analyst at ABN Amro.


Mr Hardwick said there was some disappointment that Unilever had not gone further than a leadership reshuffle and announced plans to end its dual listing. Instead, it gave Mr Burgmans the task to lead a study in 2006 of Unilever's corporate structure, which will assess whether a single listing would help the company issue equity as acquisition currency for a merger.


Calls for such a move have increased since its main rival, Procter & Gamble, announced its $57bn takeover of Gillette, and since Shell's move to a single listing in London. Mr Burgmans would need to assess the tax and political implications of such as move.


But Mr Cescau said it was more important to focus on the top line, rather than distracting management with a major overhaul of the corporate structure. As a Frenchman, he sought to appear neutral in the debate over whether the company should have its headquarters in London or Rotterdam.


"For me, Paris would be the place," he said.

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