New consumer CEOs are about to clean up

The consumer-goods sector is undergoing its biggest management shakeup in decades — one that could transform the makers of everything from Vaseline to vodka.

During the past six months or so, there’s been a raft of leadership changes at some of the world’s biggest brand manufacturers. But not all
opportunities are created equal. For all its recent turbulence, Unilever Plc’s new chief executive officer stands the best chance of creating value.

The revolving doors swung open last September, when Reckitt Benckiser Group Plc CEO Laxman Narasimhan quit to join Starbucks Corp. The maker of Nurofen painkillers and Dettol disinfectant is still searching for a replacement.

Just a few weeks later, Unilever announced that Alan Jope, the boss who had been under pressure after last year’s botched £50 billion ($62.4 billion) bid for GSK Plc’s consumer arm (now listed as Haleon Plc), would retire this year. He will be succeeded in July by Hein Schumacher, who joins from Dutch dairy cooperative Royal FrieslandCampina. Meanwhile, Unilever chairman Nils Andersen has been on the board since 2015 and is approaching the point where he would no longer be considered independent under UK governance rules. That could mean a change of chairman once Schumacher is settled in.

More recently, Cees ‘t Hart, who has successfully steered Carlsberg A/S for the past eight years, decided to retire and will be succeeded by 45-year-old Jacob Aarup-Andersen, who has led ISS A/S for the past three years. And two weeks ago, Diageo Plc announced that Ivan Menezes would retire after 10 years as CEO to be succeeded by Chief Operating Officer Debra Crew.

Of all the newcomers, Schumacher at Unilever looks best placed to succeed. Despite the company’s scale and that it generates 60 percent of its sales from emerging markets, Unilever underperformed during Jope’s tenure.

But this masks the work he did to simplify the company’s structure, moving from a regional focus to five businesses organised around product categories. With each division fully responsible for their strategy and performance globally, the company now has a better chance of tackling its historic underperformance.

If Unilever proves to be too cumbersome and improvement fails to materialize, there is another obvious route: a breakup. In simple terms, this would be a split between Unilever’s food and non-food operations. But with the five business units, Unilever could be sliced and diced in different ways, and much of the groundwork for separation has already been done.

There are also some obvious levers to pull at Reckitt Benckiser. Former CEO Narasimhan made progress cleaning up the mess left by his predecessor, Rakesh Kapoor. But a new CEO can still add some shine. First, he or she should sell what is left of the disastrous $17 billion acquisition of Mead Johnson six years ago. It put the rump of the baby-milk business on the market last year but didn’t strike a deal. Then there’s the bigger prize once the new leader gets settled in —  a deal with Haleon.

Of course, navigating either Unilever or Reckitt won’t be straightforward. At Unilever, Schumacher has activist investor Nelson Peltz, who joined the board last year, to contend with. Reckitt, meanwhile, has some of the highest margins in the sector, so it’s hard to see how much more can be squeezed out.

But taking the top jobs at these companies still looks better than leading Diageo or Carlsberg. Both outgoing CEOs did a good job. For example, Diageo’s Menezes, alongside chairman Javier Ferran, did many of the things an activist investor would do, such as tidying up the portfolio, cutting costs and returning cash to shareholders. The main task for the incoming leaders will be protecting legacies without leaving any nasty spillages in the drinks aisle.

There is one big strategic move Diageo’s Crew could make: Sell Guinness. But it’s hard to see this happening without having something to spend the proceeds on. Perhaps if LVMH Moet Hennessy Louis Vuitton SE were to bid for Chanel or Cartier-owner Cie Financiere Richemont SA, then it might look to sell its 66 percent stake in Moet Hennessy. Diageo, which owns 34 percent, could sell Guinness to help it buy out LVMH. But that’s a lot of ifs and coulds.

Amid the merry-go-round, there’s one bastion of stability: CEO Mark Schneider of Nestle SA. He took the helm at the beginning of 2017 and has so far achieved a remarkable turnaround, reshaping the portfolio and energizing the world’s biggest food-maker. But cracks are emerging.

He said in November that 2020’s almost $2 billion deal to buy the shares in Aimmune Therapeutics that Nestle didn’t already own hadn’t lived up to expectations. He is now exploring options for Aimmune, the developer of the Palforzia peanut allergy treatment. And investors have begun to ask questions about the level of sales growth, margins and investment.

After such a phenomenal run, could he be tempted to get out at the top? Schneider insisted in November that he was fully committed and would be at Nestle for the long-term. He might want to do a big deal, perhaps in medical nutrition or vitamins and supplements.

For now at least, Nestle’s continuity stands out against the rest of the sector’s musical chairs.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Views are personal and do not represent the stand of this publication.

Credit: Bloomberg