Unilever, whose 400 brands range from Popsicles ice pops to Dove soap, is reviewing its product line with an eye toward selling those that don’t meet social impact standards.
CEO Alan Jope saie on the company’s last earnings call that 28 brands accounting for more than 50% of sales meet its “purpose” standards. It wasn’t clear which brands met the standard, although Hellman’s mayonnaise, one of Unilever’s best-known brands, wasn’t among them. Hellman’s managers were trying to meet the standard with cage-free eggs and a campaign to combat food waste, according to the Financial Times.
Unilever’s effort underlines the challenges companies face balancing investors’ growing demands for earnings growth and social impact. The case is particularly pressing for Unilever, which has been under mounting pressure in recent years to improve profits. Jope took over as CEO in January.
“There will come a day when we say: ‘You know what? This brand or this category is just not going to be able to find its purpose’,” Jope said.
According to Unilever, its strategy isn’t driven by altruism, though it stresses that it can make money and do good. The company’s 28 Sustainable Living Brands grew 69% faster than the rest of Unilever’s business in 2018, up from 46% in 2017. According to Unilever, these brands, including Dove soap, Knorr soup mixes and Lipton tea, delivered the bulk of its growth.
A 2018 Porter Novelli/Cone study found that 75% of consumers expect businesses to help make the world a better place. The survey also found that nearly eight in 10 Americans say they are more loyal to “purpose-driven” brands than to traditional brands. Nearly three-fourths of respondents would be more willing to defend “purpose-driven” brands facing adversity.
Data from Forrester Research, found that nearly seven of 10 millennial consumers actively consider a company’s values when making purchases compared with about half of all US adults that are online.
According to Unilever providing benefits to others is good for its bottom line.
The company’s Philippines business ran a pilot project this year where consumers could refill bottles of shampoo and conditioners, reducing plastic waste. As a result, Unilever’s Philippines hair care business grew by double-digit percentages in the first half of 2019.
Unilever organized a one-day clean-up of 2,000 mosques in Indonesia in 13 cities during the Muslim holy month of Ramadan. Indonesia is the world’s most populous Muslim country
“I don’t think it’s a coincidence that our Indonesian home hygiene business is up high single-digits in the first half,” Jope said. “And, of course, one of our most-loved brands Ben & Jerry’s continue with various social justice campaigns, creating dialogue around those issues that have followed the legalization of marijuana in the U.S.”
Doing good things won’t, however, satisfy Unilever’s shareholders.
Jope’s challenge going forward is “to articulate how his reformist agenda around marketing is going to deal with investor preoccupations around slow top-line growth,” Jefferies Analyst Martin Deboo told The FT.
U.S. shares of Anglo-Dutch Unilever have gained more than 8% this year, underperforming rivals such as Procter & Gamble, which has soared nearly 30%, and Church & Dwight, which gained more than 14%. The S&P 500 Index has risen 18% since January.
Unilever didn’t respond to requests for comment.