The dozy beast had better wake up as the vultures are circling

My office is just around the corner from Unilever, a massive convex crescent of a building on the north side of Blackfriars Bridge. It is pillared and crenellated and it has statues on its cornices. We call it the Big House, because in this neck of the woods we feel we are the tied cottages on some grand estate over which Unilever presides.

It is as much a part of the architecture of Britain’s imperial past as is Admiralty Arch. Unilever is solid and in command. But, like our national decline as a world power, Unilever has seen better days. Its glory days, under the patrician command of the great Lords Leverhulme, are over. It is worthy, but dull. And one wonders what is to become of it.

Last week, Unilever announced some dull figures. First-half profits were flat – unchanged at 1.12bn on turnover that was up eight per cent at 16.5bn – as the Anglo-Dutch consumer goods conglomerate absorbed restructuring costs of 60m which it spent on integrating Hélène Curtis, the US shampoo manufacturer it acquired in February, for close on 500m.

It gets duller. The company has made 24 acquisitions and 15 disposals so far this year, at a net cost of 1.1bn. The Hélène Curtis purchase lifted sales by ten per cent in the second quarter. The second half will include an estimated 60m for the re-organisation of Diversey, which it bought from Molson in January, and which has catapulted Unilever into second place in world industrial cleaning products.

Meanwhile on the dull front, bad news for Unilever comes in the form of mad cows, which continue to have a negative impact – BSE is said to have cost Unilever some 21m so far – and good news comes from Elizabeth Arden, where sales rose by seven per cent on the back of the launch of a new fragrance called Black Pearls. Another new perfume, Fifth Avenue, will be launched in the second half.

How many readers do I still have with me? I suspect a number of you will have nodded off by now. Others will have been distracted by more exciting spectacles such as paint drying. If, on the other hand, this stuff from the interim report of Unilever is of gripping interest to you – well, then you’re really sad.

But this column is not going into competition with Mogodon. The reasons I am subjecting you to the soporific effects of Unilever’s results are twofold: firstly, something must be done about Unilever before it bores everyone to death; secondly, with a fresh management lead, I believe the opportunity for change is coming in the second half.

The fact is you can conceal a great deal under cover of dullness. In Unilever’s case, there have been three restructuring programmes since 1990 (currently costing the company 250m a year), none of which have improved financial performance. Competitors such as Nestlé or Procter & Gamble frankly leave Unilever in the shade. If a country’s decay can be charted by events that make it look foolish, like Britain’s end-of-empire fracas at Suez, then Unilever’s Persil Power launch last year and subsequent scrap with P&G was a symptom of its decline.

Niall FitzGerald takes over as chairman of Unilever from Michael Perry next month and he must shake down the old guard. He is said already to have introduced a flatter, more flexible senior management structure, focused firmly on where Unilever’s capital resources will best be deployed. He has much more to do besides, particularly in relation to improving margins, which really have no excuse for not improving as packaging and raw material prices fall.

If FitzGerald doesn’t start to crack Unilever’s complacency in the second half, then somebody else might decide to have a go. By that I mean it is not inconceivable that Unilever could face a takeover bid, with a view to a break-up or severe rationalisation. It might require 15bn to take Unilever out, so it would have to be a predator from the top table, but less plausible corporate manoeuvres have succeeded.

We are entering an era in which the world’s food, drinks and consumer goods conglomerates will increasingly seek to consolidate. The rising power of retailers has squeezed manufacturers’ margins over the past five years and sales growth in developed markets has proved elusive – witness Unilever’s experience in continental Europe.

The fragmentation of these industries invites the economies of scale that could be brought to bear through eliminating duplications in production, distribution, marketing and head-office costs. The recently-leaked document on a possible takeover of Grand Metropolitan by Guinness demonstrated that the investment banking community takes such possibilities seriously.

The danger is that predators will pay too heavily for such merger benefits – Tomkins’ purchase of Ranks Hovis McDougall and Nestlé’s of Perrier are cases in point. Also, there is a competitive case for letting lame ducks, such as Allied Domecq and United Biscuits, continue to struggle on. But the advantages of consolidation within these industries are attractive.

There is much that Unilever can achieve by streamlining. And there are marketing alliances that can usefully be struck, along the lines of Rémy Cointreau’s arrangement with Grand Met in Singapore, and doubtless FitzGerald will be looking at such opportunities.

But if he doesn’t wake up the dozy beast that is Unilever, then someone might creep up on it while it sleeps. Times could be growing less dull for the Big House.