Unilever: You are what you eat

blurred magnifying glass with "Unilever" logo in focus in the lens

In 2000, when Unilever acquired Ben & Jerry’s, social investors worried about what would become of the iconic Vermont company’s mission. Would a large multinational allow Ben & Jerry’s to continue its mission of trying to save the world with ice cream? Headlines such as “Ben & Jerry’s Sells Out”[i] and “Ben & Jerry’s to Unilever, With Attitude”[ii] graced the pages of major publications. While it was a rocky road at times, in the interceding 17 years, Ben & Jerry’s and Unilever have quieted many of the critics by aiming high on sustainability.
Since we last profiled Unilever in early 2015, the company has forged ahead with its broad array of sustainability initiatives—part of the company’s plan to integrate sustainability into strategy, brands, and innovation through its Sustainable Living Plan. The plan focuses on three main goals:

  • To help more than one billion people improve their health and well-being by 2020
  • To reduce the environmental impact of its products by half by 2030
  • To enhance the livelihoods of millions of people through the promotion of inclusivity

While there are a number of projects and targets underlying each of these headline goals, there have been some developments in recent years that have jumped out to us.
The company has committed to being carbon positive in its operations by 2030, meaning that it will generate more renewable energy than it uses. It has also committed to science-based greenhouse gas reduction targets. Companies left and right are lining up to commit to becoming carbon neutral (which we think is great), but committing to be net positive raises the bar. The company is also thinking about the impact of its fleet. In 2017, it joined companies like IKEA, HP, and PG&E in the EV100 initiative, through which companies commit to making 100% of their fleets comprised only of electric vehicles by 2030. The company is also trying to negotiate discounts on lease rates for EVs for employees.
Unilever is also making big commitments on social issues. As part of its efforts to promote gender equity, Unilever has committed to removing gender stereotypes from its ads across Unilever brands and to integrating more positive, empowering images of women. In 2017, it brought together a number of other companies into the #Unstereotype initiative through the UN Women program. This move highlighted the company’s ability to collaborate on large-scale challenges.
While its sustainability strategy seems to be paying off, it hasn’t been all Americone Dream and Milk and Cookies; the company has had a Truffle Kerfuffle (trademarked) or two. In October, the company pulled a Dove ad after it was heavily criticized as being overtly racist. In 2016, a report from Amnesty International made allegations of forced overtime, discrimination, and unsafe conditions at one of Unilever’s “key” palm oil suppliers, Wilmar. These issues are concerning, but we recognize that large companies that are focused on sustainable transformation will make mistakes. The company seems responsive when issues crop up and aims to continually improve – which is what we as investors want to see when issues arise.
While sustainability has been the topic du jour for the company, it has continued to execute well on business strategy. It recently rebuffed a takeover offer by the private equity firm that owns Kraft Heinz. It also made another high-profile acquisition of a Vermont mission-based company in 2016 with Seventh Generation and recently complemented the purchase by buying Sundial Brands, a personal care products company and B Corp. The Kraft Heinz offer forced the company to do a high-level strategic review that has resulted in the company’s planning to simplify its legal structure (currently a two-headed beast based in both London and Rotterdam) and dispose of its spreads (read: margarine) businesses. We are impressed that despite the pressure from some investors to “increase shareholder value,” often code for short-term action to increase profitability, the company remains committed to its long-term approach and its values.
We continue to like Unilever’s long-term outlook, with healthy exposure to emerging markets and opportunities to improve its overall profitability. The stock has shot up over 40% this year, diminishing its short-term attractiveness. But with its solid balance sheet and broad geographic diversification, Unilever stock should provide a safe harbor for investors in whatever stormy times may lie ahead for the markets.

[i] https://www.wired.com/2000/04/ben-jerrys-sells-out/
[ii] http://www.nytimes.com/2000/04/13/business/ben-jerry-s-to-unilever-with-attitude.html