Five challenges awaiting Alan Jope’s successor as Unilever CEO

Unilever is on the hunt for a new CEO, following the announcement that Alan Jope will be stepping down. He will retire from the business at the end of 2023, giving the board just over a year to find a new replacement.

As of yet there’s little indication as to who Jope’s successor might be. The former marketer was promoted from within in 2019, following four years as president of beauty and commercial care and a total 35 years with the company, but Unilever has said it will consider both internal and external candidates for the position. Whether the company will appoint another marketer to the role remains to be seen.

Jope’s time at Unilever has been marked by the Covid-19 pandemic and now inflation, but he has also managed to make a number of changes at the company, designed to better set it up for growth. These include a restructuring of business divisions and a new focus on areas like ecommerce, international expansion and purpose-driven brands.

While elements of Jope’s strategy have been subject to criticism by shareholders and share prices have dipped during his tenure, Unilever’s latest financial results are positive and suggest the business is weathering the storm of inflation and reduced consumer spending.Alan Jope to step down as Unilever CEO

In its latest results for the first half of 2022, the company reported underlying sales growth of 8.1%, with a 9.8% increase in price and 1.6% drop in volume sales. Sales turnover therefore amounted to €29.6bn (£25.03bn), while underlying operating profit increased by 4.1% to €5bn (£4.23bn).

It remains to be seen how the business will perform over the next year and what exactly the new CEO will be taking on in 2024. What seems certain, however, is that Jope’s successor will face many decisions and competing opinions over how they should run the FMCG giant.

Here are the top five challenges awaiting the new CEO:

1. The long-term impact of inflation

The next CEO of Unilever is likely to begin their leadership in choppy and uncertain economic waters. While Jope will be in charge for 2023, it seems likely that the economic impact of inflation, which has been triggered by issues in the global supply chain as a result of the pandemic and ongoing war in Ukraine, will still be a factor in 2024.

Indeed, the Bank of England’s economists have predicted the UK will enter into a recession as inflation intensifies. The bank has predicted the country will enter a recession before the end of this year, and that this is likely to continue for at least 12 months. In the US, economists are forecasting that higher prices will continue well into next year, and possibly beyond.

Unilever has been taking action on price in an attempt to offset the impact of inflation. On a call to investors in July, Jope summarised the business’s current approach as follows: “It starts with precision pricing taken quickly and single-mindedly to protect the shape of the P&L and retain our ability to invest behind our brands.”Unilever ascribes brand growth to ‘precision’ pricing action taken to offset inflation

He added that the business was closely monitoring its competitors’ actions and consumer behaviour across its brands to ensure it doesn’t go “too far” with price increases. He said the business was prepared to accept some impact on volume due to these increases.

Other major FMCG businesses have been pursuing a similar strategy. In July, Procter & Gamble’s CEO Jon Moeller said the company was investing in innovation behind its brands to help justify the higher prices it has had to implement.

Although much is likely to change between now and 2024, Unilever’s new CEO will have to evaluate the success of Jope’s inflation strategy and determine how to evolve pricing and marketing to best fit the economic situation.

If they continue to follow Unilever’s current playbook, the new CEO will have to ensure the brands they oversee can continue to prove to consumers that they’re worth their increased price. Currently, one of the core goals of the pricing strategy is to allow the business to continue investing behind its brands, including increased marketing spend in the second half of this year.

However, while Jope has been clear in his belief that stronger brands equate to a stronger business, his successor could feel that spend should be directed elsewhere in difficult economic times.

2. The point of purpose

This year, the merit of Jope’s focus on brand purpose has been hotly debated. From Hellmann’s to Dove to Ben & Jerry’s, Unilever contends that purpose drives both short- and long-term growth for its brands.

Among the most notable critics was major investor and fund manager Terry Smith, who is the founder of Fundsmith Equity Fund. Earlier this year he labelled Unilever’s focus on purpose as “ludicrous” and blamed it for the firm’s lacklustre performance during the previous year.

“A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot,” Smith wrote in a letter to his fund’s investors.

Unilever has rebutted criticism, highlighting the superior growth of its purpose-driven brands in the company’s results for 2021. Dove experienced its fastest growth in eight years at 8%, and Jope called out Hellmann’s 11% growth and Ben & Jerry’s 9% growth as “key performances” within the group.Unilever highlights Ben & Jerry’s and Hellmann’s growth following brand purpose criticism

However, in addition to investor criticism, Unilever’s purpose strategy has also pulled the business into uncomfortable political territory with ice cream brand Ben & Jerry’s. In 2021, the brand announced it would no longer be selling its products in Israeli territories in the West Bank, stating it was “inconsistent with [its] values” to continue doing so. On acquiring Ben & Jerry’s in 2000, Unilever agreed to leave the brand with full control over its social mission.

The FMCG giant ended up in a legal battle with its own brand after deciding to sell its Israeli Ben & Jerry’s business to a local operator. Ben & Jerry’s sued its parent company, alleging the sale would damage its brand, but eventually lost the case.

While Jope is adamant purpose delivers tangible results for the business, a successor may be more inclined to listen to dissenting voices from shareholders and sceptics. Navigating this debate will be a significant challenge for any incoming CEO.

3. Furthering the digital agenda

Jope took on the role of CEO in January 2019, meaning he only had around a year in post before the pandemic kicked in. While digitalisation and ecommerce were already high on the agenda for Unilever, national lockdowns meant the need to adopt effective online practices to reach consumers became much more urgent.

Unilever is clear that ecommerce will “remain a key channel” in its post-pandemic years, and has identified it as a key strategic pillar for its growth going forwards. In its latest results call in July, Jope said he wanted the business to “lead in channels of the future”.

Under former marketer Jope’s leadership, marketing has played a crucial role in this process of digitalisation and the adoption of ecommerce. Unilever’s top marketer Conny Braams previously told Marketing Week she believes businesses’ digital transformations should be led by marketers, explaining that the company’s ambition is to “build brands” through its commerce channels. She highlighted retail media as one “really important” area that Unilever wanted to explore.Unilever’s marketing boss: CMO title change reflects ambition to ‘build brands’ via commerce channels

Online channels saw unprecedented growth during the pandemic, and Jope admitted in July that Unilever is now seeing ecommerce activity in markets such as the US begin to “moderate” as more shoppers return to in-person retail. However, he was adamant that online channels remain just as important as before.

“We see a greater number of consumers researching online and then purchasing offline. That emphasises the growing importance of digital channels in the path to purchase,” he explained.

The challenge for the next CEO will be maximising growth for the business across online channels. The new CEO will need to forge a path forward for Unilever’s digital business against extremely strong pandemic comparators, and decide how the organisation is best served through its online channels.

4. Managing a new structure

In January of this year, Unilever announced plans to introduce a new organisational structure designed to “make it a simpler, more category-focused business”.

The restructuring in July saw Unilever reshaped into five category-focused business units: beauty and wellbeing, personal care, home care, nutrition, and ice cream.

At the time, Jope said: “Moving to five category-focused business groups will enable us to be more responsive to consumer and channel trends, with crystal-clear accountability for delivery.”

When the business reported its results for the first half of 2022 in July, he claimed the restructuring was already paying dividends by allowing the business to more precisely target price interventions on different brands.

We see a greater number of consumers researching online and then purchasing offline. That emphasises the growing importance of digital channels in the path to purchase.

Alan Jope, Unilever

As part of this restructure, the business has been divesting brands that aren’t in categories tipped for future growth. In 2021 Unilever divested its tea business, which included brands such as PG Tips and Lipton.

Some analysts have predicted there are more divestitures to come, particularly when it comes to food brands. The new structure separates out ice cream, but rolls all of Unilever’s other food brands under the banner of “nutrition”.

Under Jope’s leadership, Unilever has been prepared to divest brands which do not fall under strong growth categories. Identifying which (if any) other brands and categories need to go will be a considerable challenge for the incoming CEO taking over the reigns of this reorganised business.

5. Sustainability

Action on the climate crisis may well turn out to be the defining issue of our time, so it needs to be high-up the agenda for any business leader. Over the years, Unilever has sought to position itself as a leader on sustainability.

Indeed, in 2021 the business’s vice-president of global ecommerce Claire Hennah said the company’s commitment to sustainability acted as “a talent magnet” for the business.

For employees, shareholders and consumers, action on the planet is increasingly a factor in whether they choose to work, invest or spend with particular businesses. Sustainability can no longer be seen as a altruistic value, but must also be seen as a driver of business.

However, for a large FMCG company like Unilever, it may be difficult to take widespread action on the environment. Reduced consumption of consumer goods is beneficial for the planet, but also a challenge for a business that relies on high volume sales.

An incoming CEO will be expected to continue positioning Unilever as a business which cares about sustainability. However, with consumers and advertising bodies more conscious of “green-washing” than ever, they will need to ensure the business’s actions on the environment appear sincere and impactful, while maintaining growth for the business itself.