When the cash cows are no longer sacred

Businesses, especially the large, listed ones that exist under the constant arc-light of City scrutiny, are often (rightly) accused of pursuing short-term profit at the expense of strategic value. So it is interesting to see two behemoths going courageously against the grain in a risky gamble for future gain.

The first example is Unilever. Overall, the annual results cast a fairly flattering light on Patrick Cescau one year into his stewardship of streamlined “One Unilever”. Profits and sales were up, and if margins were depressed by increased marketing costs, he could point to steady growth over most categories. But it was the official decision to drop Captain Birds Eye (and the frozen food business outside Italy) that marked the real measure of change at the packaged goods giant.

It’s one thing to acknowledge that frozen food is a category with a cloudy future and quite another to finally offload a &£500m master brand, which earns an estimated &£50m a year in profits and is the biggest UK supermarket brand behind Walkers.

The &£1bn question is/ what gave Cescau the courage to do it? To be sure, frozen food may be on a hiding to nothing in the longer term, as it is gradually gobbled up by the chiller cabinet. But, like the proverbial slowly boiling frog, it is difficult to say when the coup de grace will actually happen. In the meantime, Birds Eye, though gradually diminishing in strength, could have provided a valuable cash cow as Unilever diversified into more profitable areas.

City analysts seem to be hoping that proceeds from the Birds Eye sale will be returned to shareholders – hardly a recipe for long-term growth. In fact, Cescau is sending out a more complex message to all Unilever stakeholders, not merely shareholders. He has indicated that keeping Birds Eye would have been a “drag” on Unilever’s overall growth rate, which surely implies reinvestment of some of the realised funds in faster-growing areas, such as personal care and ice cream. Indeed, after a long period of retrenchment under the so-called path-to-growth strategy, there are clear signs of innovation in these higher-margin areas coming to the fore. Last week, for example, it was disclosed that Unilever is developing a completely new health brand, which is likely to be launched with one of the most substantial marketing budgets in years.

Above all, however, Cescau seems to acknowledge that he does not have time on his side. In taking the Birds Eye gamble (as much with his own career as with Unilever’s future), he is signalling that there are no sacred cows at Unilever – not even when they are enormous cash cows.

Similarly bold in placing value before short-term profit is Daily Mail and General Trust, which is putting its own version of the family silver, Northcliffe Newspapers, up for a &£1.5bn auction. Arguably DMGT, being a closely held company, finds it easier to make such strategic decisions than the likes of Unilever. That does not diminish the enormous pressure to get the reinvestment in business publishing, exhibitions and new media assets right. Not easy when, in the case of the latter, present profit may be a tiny fraction of what could have been proportionately derived from the local newspaper business.

Latest from Marketing Week


Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now


Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.


From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.


Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3703 or email customerservices@marketingweek.com

If you are looking for our Jobs site, please click here