Unilever slimming down for the future

Unilever, the Anglo-Dutch colossus behind everything from Dove soap to Ben & Jerry's ice-cream, has announced it is to cut 20,000 jobs, mainly from its European operations. The news rather sours the earlier announcement that it had finally turned in some decent results. This was a rare moment of good cheer for the 78-year-old company, which has increasingly become a lumbering giant and, before the lid was slammed down on phenomenal borrowing recently, had even been touted as ripe for a private-equity disemboweling.

Last Updated: 06 Nov 2012

Such job cuts are an extreme measure, but few would disagree that something heavy was called for. Sustained periods of underperformance had led to widespread criticism of the $48bn group. Shareholders have been calling for a division of the constituent food and home product wings, or for an end to its dual nationality, and there were rumours last month of a possible bid from Colgate-Palmolive. And with the private-equity vultures setting their sights ever higher before the current belt-tightening, even a giant like Unilever wouldn't have been out of their reach.

Results are now improving. Underlying sales growth is expected to be at the upper end of its target range of 3-5% for 2007, with pre-tax profits up 3% to 2.7m euros, on turnover up 1% to 20m euros. That's an impressive performance against a backdrop of rising commodity prices, especially for Unilever.

The company is axing half of its senior UK managers in a bid to streamline its operations, and has reduced senior management worldwide by 30%. The number of people it employs globally dropped by 27,000 last year, and it has begun shedding some of its weaker brands to focus on its core offerings. Perhaps private-equity has taught it an essential lesson in shaping up.

For an in-depth retrospective on Unilever, read this article from MT's 40th anniversary special.

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