So long Hein Schumacher, we hardly knew ye.
After little more than 18 months at the helm of the CPG giant,Schumacher is being shown the door to be replaced by CFO Fernando Fernandez (pictured above) next week.
The move left analysts “surprised”, “shocked” and “gobsmacked”.
When Nestlégot rid of former boss Mark Schneiderout of the blue last year it was hardly a surprise, given the scale and longevity of the group’s decline in performance. But that isn’t the case at Unilever.
Schumacher was well liked by investors and had the backing of influential activist Nelson Peltz. He also made rapid progress inputting a turnaround plan in motionwith sweeping organisational changes and efficiency savings.
Indeed, the strategy reset had already produced results as Unilever delivered its best set of annual financials for more than a decade in 2024, while thespin-off of the ice cream divisionis also on track. And since Schumacher joined in July 2023, margins have improved by a couple of percentage points and underlying operating profits increased by 15%. Shares also rose by almost 15% under his stewardship – untila wobble earlier this monthwhen a warning of a slower start to 2025 amid subdued market conditions saw the stock sink 6% in one day.
But Unilever is by no means alone in navigating choppy waters this year, with equally difficult conditions for its global peers.
“Schumacher has breathed new life into the business, making it run more efficiently and focusing on what the company does best,” argues AJ Bell investment director Russ Mould. “Under normal circumstances, the progress so far would be applauded. That makes his departure all the more mysterious. It suggests disagreements behind closed doors with colleagues and/or shareholders.”
So, what is going on? And will it lead to a quicker sell-off of food brands such as Marmite, Colman’s and Pot Noodle?
What’s behind Unilever’s shock decision?
It is understood the decision – by “mutual agreement” according to the official statement – was made at a board meeting on Monday. Schumacher departs as a “good leaver”, continuing to receive his €1.85bn paycheque until the end of May, so any speculation around a bust-up or gross misconduct can be ruled out.
Schumacher himself provided a conciliatory parting message, talking up the progress made in a short period and how there is a “strong” leadership team in place to take the business from strength to strength in the future.
Most telling is the comment by Unilever chairman Ian Meakins, who thanked Schumacher for resetting the strategy and for the “focus and discipline” he brought to the company. “While the board is pleased with Unilever’s performance in 2024, there is much further to go to deliver best-in-class results,” he added.
Schumacher has steadied the ship and set it on the right course, but the disappointing start to 2025 seems to have sealed his fate and driven Unilever to turn to a new leader to push the growth action plan introduced in November 2023 harder and faster.
Callum Elliott of Bernstein suspects the changing of the guard boils down to a loss of confidence in Schumacher at board level over a number of months. “We note that Unilever chairman Ian Meakins has a reputation for being somewhat ruthless, and with a well-loved and able candidate waiting in the wings, the hiccups of the past few months and weeks have likely led Meakins to pull the trigger,” he says.
Similarly to the situation at Nestlé – whereMark Schneider was replaced by group veteran Laurent Freixe– Meakins and the rest of the board have ousted an outsider (Schumacher joined from Royal FrieslandCampina) in favour of a company man (Fernandez has been with Unilever since 1988).
An outside influence
James Jones at RBC wonders whether this is a victory for those Unilever insiders who resented the appointment of an external CEO.
“We felt the job needed an outsider, but maybe this was not the view of a meaningful proportion of Unilever’s employees,” he says. “Certainly, we have been picking up suggestions that morale has been impacted where restructuring actions have been most assertive, but if that’s the reason, it feels very extreme.
“For now, the best we can come up with is that as an outsider with a commitment to changing Unilever he might have ruffled too many feathers internally. Fernando Fernandez, the incoming CEO, has been at Unilever for 37 years and might be a more acceptable change agent.”
Meakins talked up how impressed the board was with Fernandez’s “decisive and results-oriented approach and his ability to drive change at speed” and was keen to highlight how the new boss had partnered with Schumacher in the development of the growth action plan, as well as driving the productivity programme.
Barclays’ Warren Ackerman agrees with the board that Fernandez is best-placed to take Unilever where it needs to go.
“The board have made a decisive decision to empower the best candidate for the next leg of the story,” he says.
“This decision is not a slight on Hein Schumacher. We view it as a hard-nosed decision about who is the best person going forward into the next stage of its evolution.”
Who is Fernando Fernandez?
Fernandez, an Argentine economist, became Unilever CFO last year, but he previously ran the fast-growing beauty and wellbeing businesses – and was also a former head of the Latin America, Brazil and Philippines divisions. This experience in emerging markets is massively important given that India (which Fernandez has called “a real jewel” for the group) lies at the heart of the Unilever growth plan.
By all accounts, the new CEO is well-liked and respected by investors, and he gave an impressive performance at Unilever’s Capital Markets Day event in November.
Elliott adds the contrast between Fernandez and Schumacher could not be starker.
He reckons it’s impossible to meet with Fernandez and not be enthused by “the energy and dynamism on display”.
“This dynamic of fiery, charismatic CFO vs understated CEO in Hein was always somewhat unusual, and in this light Fernando’s promotion to CEO is not a surprise,” Elliott adds.
The Bernstein analyst goes on to embellish the differences between the old and new boss, with Schumacher speaking for an hour at the CMD using an autocue, while Fernandez “wandered around the stage charming the audience seemingly unscripted”.
Power brands
Fernandez’s elevation also raises the question of the future for major food brands such as Marmite, Colman’s and Pot Noodle. While all household names, they are now considered non-core.
Schumacherconfirmed at the CMD that Unilever’s portfolio of food brands would be prunedas the group focuses on businesses with the potential for global growth. Only Hellmann’s, Knorr and Horlicks – as well as Wall’s, Ben & Jerry’s and Magnum in the ice cream division – are classed as power brands.
Unilever clearly sees its future growth coming predominantly from personal care, beauty & wellbeing and home care (withthe anticipated £230m acquisition of sustainable deodorant brand Wildfurther evidence if it were needed of where the priorities lie).
Ackerman notes that while Schumacher’s experience was in the food industry, Fernandez’s background is much more aligned with the direction of travel.
“The market may conclude that Fernandez may look to accelerate portfolio change and drive costs out more quickly,” he adds.
We’ll perhaps find out soon enough whether Fernandez is a lover or a hater of Marmite.
Whatever the long-term outcome for the group, such a sudden change at the top can’t fail to be destabilising in the short term and is not without considerable risk.
Investors certainly didn’t greet the news with jubilation: shares dropped 2% today. However, that decline was actually relatively minor, especially given the total surprise of the news and the speed of Schumacher’s departure, and should probably be read as a positive.
Schumacher has done many of the hard yards already, laying the ground for a long-awaited recovery at Unilever, but clearly he didn’t inspire the board’s faith in getting there quickly enough.
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