Unilever (ULVR)

[TheMotorcycleBoy]

Are branded food goods really that much of a moat these days? Have to say my missus and the MiL frequently substitute cheaper shop-own brand products in their baskets these days.

And I guess the growing ranks of folk on the minimum wage will be adopting that strategy more and more.

Perhaps it's a moat in the emerging markets (e.g. India), but surely in England most food shoppers (especially now with the reappearance of inflation >2%) will be fairly price/brand savvy.

Just one of m' thoughts, like.

Matt

[SalvorHardin]

What I also don't understand is how a tiny(?) percentage stake in Unilever could enable this fund to do it's stuff, which is apparently its technique in extracting value from its targets?

The usual way this goes is that the activist investor does something like this:

1) buys and declares a fairly small stake, then says what it what changes it wants to see

2) keep talking about what needs to be done and agitate for a seat on the board

3) get other activist investors and long-term shareholders to support you, thus greatly magnifiying your effective clout for making changes

4) if the company won't make changes, sack some directors. Especially the CEO, who you replace with your preferred candidate

This is what happened at Canadian Pacific (CP). I owned shares in CP so paid a lot of attention to what Bill Ackman did with an eventual 14.2% stake and the support of other major shareholders. In particular sacking the CEO and five other directors, getting a seat on the board and replacing the CEO with his own man.

On April 4th 2012, Bill Ackman came out swinging in a scathing letter to CP shareholders disparaging CP’s Board of directors in general, and its CEO, Fred Green, in particular. According to Mr. Ackman, “under the direction of the Board and Mr. Green, CP’s total return to shareholders from the inception of Mr. Green’s CEO tenure to the day prior to Pershing Square’s investment was negative 18% while the other Class I North American railways delivered strong positive total returns to shareholders of 22% to 93%.” [3] Thus, according to him, “Fred Green’s and the Board’s poor decisions, ineffective leadership and inadequate stewardship have destroyed shareholder value.”

https://corpgov.law.harvard.edu/2016/12/23/a-successful-case-of-activism-at-the-canadian-pacific-railway-lessons-in-corporate-governance/

In the five years when Ackman's fund owned CP shares, they returned 45.39% per annum (compound).

[dealtn]

Are branded food goods really that much of a moat these days? Have to say my missus and the MiL frequently substitute cheaper shop-own brand products in their baskets these days.

And I guess the growing ranks of folk on the minimum wage will be adopting that strategy more and more.

Perhaps it's a moat in the emerging markets (e.g. India), but surely in England most food shoppers (especially now with the reappearance of inflation >2%) will be fairly price/brand savvy.

Just one of m' thoughts, like.

Matt

Well brand savvy is happy paying more for a "better" product (which tends to have higher margins). It's about value for money, not buy the cheapest.

I am in no doubt there are many, like me, that happily pay (in some cases a lot) more to buy what I want. That determining factor is not price, far from it.

I don't disagree, and particularly with food and other household goods, some will, through choice or necessity, buy the cheapest, but that still leaves an enormous market for producers and retailers to service outside of that segment of the market. (It never ceases to amaze me what people buy and happily put in their, or their children's mouths!)

[absolutezero]

I didn't realise that Ben & Jerry ice cream was anti-semitic.

It is not the ice cream that is anti semitic; it would seem though that the Directors of the company are.

Dod

Are the directors anti-semitic or instead anti-Israel?

I do not know but as SH says they are refusing to sell their wares in the West Bank. The important bit is that although Unilever owns this company, for some reason when they bought it they accepted that the Board of Tom & Jerry's would remain autonomous and Unilever can do nothing about it.

Dod

Except for shut it down.

[absolutezero]

In the five years when Ackman's fund owned CP shares, they returned 45.39% per annum (compound).

Perhaps I should keep hold of my ULVR shares then...

[dealtn]

I didn't realise that Ben & Jerry ice cream was anti-semitic.

It is not the ice cream that is anti semitic; it would seem though that the Directors of the company are.

Dod

Are the directors anti-semitic or instead anti-Israel?

I do not know but as SH says they are refusing to sell their wares in the West Bank. The important bit is that although Unilever owns this company, for some reason when they bought it they accepted that the Board of Tom & Jerry's would remain autonomous and Unilever can do nothing about it.

Dod

Except for shut it down.

Why shut it down when they can sell it? Surely they aren't as bad as that as Directors!

[simoan]

What I also don't understand is how a tiny(?) percentage stake in Unilever could enable this fund to do it's stuff, which is apparently its technique in extracting value from its targets?

The usual way this goes is that the activist investor does something like this:

1) buys and declares a fairly small stake, then says what it what changes it wants to see

2) keep talking about what needs to be done and agitate for a seat on the board

3) get other activist investors and long-term shareholders to support you, thus greatly magnifiying your effective clout for making changes

4) if the company won't make changes, sack some directors. Especially the CEO, who you replace with your preferred candidate

This is what happened at Canadian Pacific (CP). I owned shares in CP so paid a lot of attention to what Bill Ackman did with an eventual 14.2% stake and the support of other major shareholders. In particular sacking the CEO and five other directors, getting a seat on the board and replacing the CEO with his own man.

On April 4th 2012, Bill Ackman came out swinging in a scathing letter to CP shareholders disparaging CP’s Board of directors in general, and its CEO, Fred Green, in particular. According to Mr. Ackman, “under the direction of the Board and Mr. Green, CP’s total return to shareholders from the inception of Mr. Green’s CEO tenure to the day prior to Pershing Square’s investment was negative 18% while the other Class I North American railways delivered strong positive total returns to shareholders of 22% to 93%.” [3] Thus, according to him, “Fred Green’s and the Board’s poor decisions, ineffective leadership and inadequate stewardship have destroyed shareholder value.”

https://corpgov.law.harvard.edu/2016/12/23/a-successful-case-of-activism-at-the-canadian-pacific-railway-lessons-in-corporate-governance/

In the five years when Ackman's fund owned CP shares, they returned 45.39% per annum (compound).

That's a great return. I don't think that kind of return will be possible with Unilever, however, since Nelson Peltz started shaking up Procter & Gamble four years ago, the share price has doubled. That's not bad, and makes me very happy as a P&G holder. He specialises in FMCG with previous experience at Mondelez, so he seems completely the right person to put a rocket under the Unilever board. Maybe not a coincidence that he left the P&G board at the end of last year...

All the best, Si

[TheMotorcycleBoy]

Are branded food goods really that much of a moat these days? Have to say my missus and the MiL frequently substitute cheaper shop-own brand products in their baskets these days.

And I guess the growing ranks of folk on the minimum wage will be adopting that strategy more and more.

Perhaps it's a moat in the emerging markets (e.g. India), but surely in England most food shoppers (especially now with the reappearance of inflation >2%) will be fairly price/brand savvy.

Just one of m' thoughts, like.

Matt

Well brand savvy is happy paying more for a "better" product (which tends to have higher margins). It's about value for money, not buy the cheapest.

I said price/brand savvy, i.e. finely balancing the compromise in price and taste accordingly depending whether it's the branded or the supermarket's own that's thrown in the trolley. That's certainly what I expect the majority of country's food shoppers to do.

I am in no doubt there are many, like me, that happily pay (in some cases a lot) more to buy what I want. That determining factor is not price, far from it.

I guess you aren't talking about ULVR's goods then? Since they won't be a "a lot more" in cost than own brands; the branded ones (e.g. Magnum icecreams, Hellmans mayo) will be noticeably but not a massive amount more pricey.

TBH I love Magnum ice creams, but actually Mel's recently bought some cheapo ices which taste pretty much as good. As a brand they certainly have fierce and growing competition:

https://www.which.co.uk/news/2021/07/ma ... aste-test/

However with all due respect I guess you aren't that representative of the bulk of the populations food shoppers. And I'm staying that's where you need to have your head at to form an objective view of the attractiveness of branded food, going forward, especially as budgets get squeezed.

Personally I'm from a fairly middle class family, but my wife is from very much an every penny/every job cuts background. My wife grew up in that atmosphere, and she will micro manage basically every buying decision possible. She'll know which branded goods have "good cheapo alternatives" and which don't.

Basically I think that she is probably one of millions who are finding it necessary to be much more discerning on food product selection, which is partly why I have some LT doubts of the durability of ULVRs current "moats".

Matt

PS you may have guessed that this is one of the many reasons (remember the stock BB debate!!) why I think increasing wealth gaps should concern share investors, especially those invested in branded goods firms.

[scrumpyjack]

I don't think it is as simple as branded or unbranded. Supermarkets have been gradually establishing their own brand as a hallmark of quality. So I'm quite happy to buy Waitrose, for example, own brand products rather than Unilever ones. I really don't think Unilever's moats are very wide or deep and when you see a list of their brands, they really don't stand out as very premium. Don't think I have ever bought Dove soap. Roger & Gallet would have far more brand appeal for me! As for Hellman's mayonnaise, when you look at the ingredients they are the same as everyone else's mayo - mainly rape seed oil!

[BullDog]

I don't think it is as simple as branded or unbranded. Supermarkets have been gradually establishing their own brand as a hallmark of quality. So I'm quite happy to buy Waitrose, for example, own brand products rather than Unilever ones. I really don't think Unilever's moats are very wide or deep and when you see a list of their brands, they really don't stand out as very premium. Don't think I have ever bought Dove soap. Roger & Gallet would have far more brand appeal for me! As for Hellman's mayonnaise, when you look at the ingredients they are the same as everyone else's mayo - mainly rape seed oil!

Indeed, Dollar Shave Club...... I don't think Unilever have made a dollar out of it since buying it in 2016 for a cool $1 billion.

[SalvorHardin]

The Financial Times has an article today about Nelson Peltz and Unilever, titled "Nelson Peltz: the activist investor hot on Unilever’s heels"

It's behind the firewall, though the usual trick of searching for the title on Google News and clicking on that link (if you haven't read too many of the FT's articles this month) seems to work.

"In late September Nelson Peltz met the chief executive of Unilever, Alan Jope, for breakfast at Claridge’s. Peltz had organised the meeting to lobby against the recent announcement that Unilever’s Ben & Jerry’s brand would stop selling ice cream in the occupied Palestinian territories — an apparent protest against Israeli settlements. Peltz told Jope his opinion: no company has any place making these kinds of political statements."

https://www.ft.com/content/a5644e85-b0f7-443d-a949-1ff7d5b33374

[Arborbridge]

I don't think it is as simple as branded or unbranded. Supermarkets have been gradually establishing their own brand as a hallmark of quality. So I'm quite happy to buy Waitrose, for example, own brand products rather than Unilever ones. I really don't think Unilever's moats are very wide or deep and when you see a list of their brands, they really don't stand out as very premium. Don't think I have ever bought Dove soap. Roger & Gallet would have far more brand appeal for me! As for Hellman's mayonnaise, when you look at the ingredients they are the same as everyone else's mayo - mainly rape seed oil!

Hellman's and Dove are regulars here.....though not consumed at the same time. Indeed, I don't remember a time when we didn't used Dove soap.

Arb.

[simoan]

The Financial Times has an article today about Nelson Peltz and Unilever, titled "Nelson Peltz: the activist investor hot on Unilever’s heels"

It's behind the firewall, though the usual trick of searching for the title on Google News and clicking on that link (if you haven't read too many of the FT's articles this month) seems to work.

"In late September Nelson Peltz met the chief executive of Unilever, Alan Jope, for breakfast at Claridge’s. Peltz had organised the meeting to lobby against the recent announcement that Unilever’s Ben & Jerry’s brand would stop selling ice cream in the occupied Palestinian territories — an apparent protest against Israeli settlements. Peltz told Jope his opinion: no company has any place making these kinds of political statements."

https://www.ft.com/content/a5644e85-b0f7-443d-a949-1ff7d5b33374

There's absolutely no doubt this guy knows what he is doing and that his presence can only be a positive thing for all shareholders. He's also damned right about the Ben & Jerrys situation. Jope is a weak leader and his clock is running down.

All the best, Si

[monabri]

Article on Trian from Peltz's previous foray with P&G.

source : Investing For Growth - Terry Smith



The next CEO at Unilever? I joked it could be Brooklyn Beckham (keep it in the family) but if he does a better job than Jope....

[Dod101]

Interestingly The Sunday Times is not so critical of Jope as of the Board of Directors in general and of the Chairman in particular. There may be something in this because few seem to have real experience of the sector, some have been in post probably too long and the Chairman has little experience either of the business or of the City. They are the people we shareholders trust to look after our investment, not the CEO. I also think that the finance man, Pitkethly is not much good. He fronted the abortive move to Amsterdam when he should have known quite well that that was unlikely to succeed.

Dod

[SalvorHardin]

Ben & Jerry's have done it again. This time a Twitter post has a go at Joe Biden about Ukraine, whilst ignoring the small point about 100,000 Russian troops being marshalled up against Ukraine's borders by Russia. It could have been written by Putin...

“You cannot simultaneously prevent and prepare for war. We call on President Biden to de-escalate tensions and work for peace rather than prepare for war. Sending thousands more US troops to Europe in response to Russia’s threats against Ukraine only fans the flame of war.”

https://twitter.com/benandjerrys/status/1489393235655106562

https://uk.finance.yahoo.com/news/ben-j ... 33523.html

Way to go Ben & Jerry's. Unilever is now seen as being pro-Putin. To think that last week I bought back all the shares I sold in early January and a load more

That said IMHO Ben & Jerry's antics makes it more likely that Nelson Peltz will get a lot more support for sorting out Unilever and selling Ben & Jerry's ASAP. Since the senior management appear to be more interested in running an NGO than a multinational consumer goods company maybe it's time for the P45s to be dished out at a senior level.

Ben & Jerry's probably doesn't realise that certain security guarantees were given by America (and Russia) to Ukraine under the Budapest Memorandum of 1994 in return for Ukraine giving Russia its share of the nuclear weapons owned by The Soviet Union.

https://en.wikipedia.org/wiki/Budapest_Memorandum_on_Security_Assurances

(One joke doing the rounds it that Ben & Jerry's new flavour is "Appease-Mint")

[BullDog]

Very happy to be out of this share and managed to exit without losing anything.

This company is starting to show signs of not being here in five years time. I have seen it before. When a company isn't happy with it's core businesses and always wants to be something else but it's not sure what.

It's ICI all over again

I think Terry Smith got his assessment of this company absolutely right.

[absolutezero]

Ben & Jerry's have done it again. This time a Twitter post has a go at Joe Biden about Ukraine, whilst ignoring the small point about 100,000 Russian troops being marshalled up against Ukraine's borders by Russia. It could have been written by Putin...

“You cannot simultaneously prevent and prepare for war. We call on President Biden to de-escalate tensions and work for peace rather than prepare for war. Sending thousands more US troops to Europe in response to Russia’s threats against Ukraine only fans the flame of war.”

https://twitter.com/benandjerrys/status/1489393235655106562

https://uk.finance.yahoo.com/news/ben-j ... 33523.html

Way to go Ben & Jerry's. Unilever is now seen as being pro-Putin. To think that last week I bought back all the shares I sold in early January and a load more

That said IMHO Ben & Jerry's antics makes it more likely that Nelson Peltz will get a lot more support for sorting out Unilever and selling Ben & Jerry's ASAP. Since the senior management appear to be more interested in running an NGO than a multinational consumer goods company maybe it's time for the P45s to be dished out at a senior level.

Ben & Jerry's probably doesn't realise that certain security guarantees were given by America (and Russia) to Ukraine under the Budapest Memorandum of 1994 in return for Ukraine giving Russia its share of the nuclear weapons owned by The Soviet Union.

https://en.wikipedia.org/wiki/Budapest_Memorandum_on_Security_Assurances

(One joke doing the rounds it that Ben & Jerry's new flavour is "Appease-Mint")

Appease-mint
I'm close to pulling the trigger on this one. It's only the Peltz involvement that's making me hang on.
Regarding B&J - if it can't be sold, shut it down. Take the loss. It's doing more reputational damage than its worth.

[monabri]

Ben & Jerry's have done it again. This time a Twitter post has a go at Joe Biden about Ukraine, whilst ignoring the small point about 100,000 Russian troops being marshalled up against Ukraine's borders by Russia. It could have been written by Putin...

“You cannot simultaneously prevent and prepare for war. We call on President Biden to de-escalate tensions and work for peace rather than prepare for war. Sending thousands more US troops to Europe in response to Russia’s threats against Ukraine only fans the flame of war.”

https://twitter.com/benandjerrys/status/1489393235655106562

https://uk.finance.yahoo.com/news/ben-j ... 33523.html

Way to go Ben & Jerry's. Unilever is now seen as being pro-Putin. To think that last week I bought back all the shares I sold in early January and a load more

That said IMHO Ben & Jerry's antics makes it more likely that Nelson Peltz will get a lot more support for sorting out Unilever and selling Ben & Jerry's ASAP. Since the senior management appear to be more interested in running an NGO than a multinational consumer goods company maybe it's time for the P45s to be dished out at a senior level.

Ben & Jerry's probably doesn't realise that certain security guarantees were given by America (and Russia) to Ukraine under the Budapest Memorandum of 1994 in return for Ukraine giving Russia its share of the nuclear weapons owned by The Soviet Union.

https://en.wikipedia.org/wiki/Budapest_Memorandum_on_Security_Assurances

(One joke doing the rounds it that Ben & Jerry's new flavour is "Appease-Mint")

Appease-mint
I'm close to pulling the trigger on this one. It's only the Peltz involvement that's making me hang on.
Regarding B&J - if it can't be sold, shut it down. Take the loss. It's doing more reputational damage than its worth.

If Unilever CAN close B&J down? I think " relocation " of the factories might be easier. Relocate to Slough ....that'll teach them!

[Dod101]

Very happy to be out of this share and managed to exit without losing anything.

This company is starting to show signs of not being here in five years time. I have seen it before. When a company isn't happy with it's core businesses and always wants to be something else but it's not sure what.

It's ICI all over again

I think Terry Smith got his assessment of this company absolutely right.

I have held it for about 25 years and have no intention of selling. We will see the results for 2021 on Thursday . It is so very easy to talk a share down, sometimes with justification of course.

Dod