As a mid-career executive in Brazil about 15 years ago, Fernando Fernandez made a decisive bet on hair and beauty by taking the then-recently acquired TRESemmé brand and scaling it rapidly across the South American market. Now 59 and serving as Unilever's chief executive, Fernandez has steered the multinational away from the sprawling food and ice cream operations that long formed a major part of its portfolio.
Since assuming the top job last year, Fernandez has overseen two landmark transactions that have pared back the group's food brands - ranging from Magnum ice creams to Hellmann's mayonnaise - and this week finalised a deal with U.S. spicemaker McCormick to consolidate Unilever's food assets into a sauces-to-spices entity valued at about $65 billion. Under the terms reported, Unilever will retain a near 10% stake in the new group, with Unilever shareholders holding an additional 55%.
The divestments recast Unilever as a narrower company concentrated on home, beauty and personal care, a set of categories where Fernandez has spent much of his 38-year tenure at the company marketing brands such as Dove and Surf. "This is the right step at the right time to build a simpler, sharper, higher-growth Unilever," Fernandez said on an analyst call after the McCormick transaction was announced. "We are creating a 39-billion-euro household and personal care pure play with leading positions in highly attractive categories, a stronger exposure to fast-growing geographies like the U.S. and India."
With the food and ice cream businesses moved out of the core group, the company will concentrate on its 23 largest home, beauty and personal care "power brands" that currently account for most of Unilever's sales. These include Dermalogica, Pond's, Sunsilk and Cif, among others.
Market reaction to the overhaul has been mixed. Unilever shares closed at a two-year low on Tuesday and slipped further on Wednesday amid investor concerns over the protracted timetable to complete the McCormick transaction, which is expected to close in 2027, and the continued share-price burden from the food operations during the transition. Some shareholders, however, back the strategic logic and see longer-term upside from a tighter focus on faster-growing categories.
"Perhaps the most overlooked benefit is the increased focus gained by simplifying Unilever's business model," said David Samra, managing director at Artisan Partners and founding partner of the International Value Group. He suggested the change shifts the company from operating in two very different industries to concentrating on a narrower group of brands in higher-growth markets.
Analysts note that while the food arm typically produces higher margins, its sales growth has lagged behind other divisions, dragging on Unilever's target to raise turnover by 4% to 6% annually. Barclays analyst Warren Ackerman commented: "The prize of a pure-play home and personal care company will be worth it in the end."
Pressure for change at Unilever has been building among investors and on the company's board. Activist investor Nelson Peltz, who holds a $1.73 billion stake and sits on the board, was among those pressing for faster portfolio simplification. That pressure contributed to the departure of the previous chief executive, Hein Schumacher, who was removed after shareholders judged the pace of restructuring insufficient. Fernandez, who served as finance chief under Schumacher, was promoted with a mandate to accelerate the process.
The recent transactions represent a notable reversal of decades in which Unilever steadily acquired food and beverage brands such as Marmite, Colman's and Horlicks. Yet changing consumer behaviour - described in the company commentary as an increasing focus on health - and the emergence of GLP-1 weight-loss drugs in recent years have weakened demand for some packaged food categories. At the same time, competition from lower-priced private-label products has intensified.
Valuation comparisons underscore part of the rationale: Unilever currently trades on a forward price-to-earnings ratio of 14.8 times, below comparable consumer-goods peers L'Oreal, Procter & Gamble, Nestle and Danone, which trade between 17.2 and 25.3 times according to LSEG Workspace data cited by market observers. "Unilever has historically traded at a discount to pure-play HPC peers like L'Oréal or Procter, partly because of the drag from lower-growth food categories," said Will Nott, a portfolio manager at investor Ninety One. He added that the stock could be re-rated, but cautioned that the market will demand "clean execution through the transition."
Currency notation accompanying the financial figures indicated that $1 equals 0.8627 euros.
Summary
Fernando Fernandez has redirected Unilever toward a streamlined portfolio centered on home, beauty and personal care after divesting major food and ice cream brands in two significant deals. The company sealed a transaction with McCormick this week that forms a roughly $65 billion food business, with Unilever retaining near 10% and its shareholders holding another 55%. The reorientation aims to create a 39-billion-euro pure-play focused on faster-growing categories and geographies, though investor concerns about execution and the multi-year closing timeline have weighed on the stock.
Key points
- The McCormick deal consolidates Unilever's food business into a roughly $65 billion entity; Unilever will retain a near 10% stake and shareholders another 55%.
- Unilever will concentrate on 23 major home, beauty and personal care brands, creating a 39-billion-euro pure-play in these categories and increasing exposure to markets such as the U.S. and India.
- The market has reacted with caution, sending Unilever shares to a two-year low amid worries about the extended timeline to close the deal in 2027 and the transitional drag from the food business.
Risks and uncertainties
- Execution risk: The McCormick transaction is expected to close in 2027, creating a prolonged period during which the market may remain uncertain about outcomes and value realisation - this affects equity markets and investor confidence.
- Growth drag from legacy food categories: Although high-margin, the food business has shown slower sales growth, which has previously weighed on Unilever's ability to meet its 4%-6% turnover growth target - impacting packaged food sector valuations.
- Competitive pressure and shifting demand: Rising competition from private-label products and reduced consumer demand for certain packaged foods, partly attributed to health trends and GLP-1 drug impacts, pose demand-side risks for food and grocery sectors tied to Unilever's former portfolio.