Unilever’s focus on long-term brand building was never going to fit with Kraft Heinz
Kraft Heinz might have agreed to “amicably” abandon its attempt to buy Unilever but in reality never have two brands been more unsuited.
Kraft Heinz and Unilever surprised everyone last night (19 February) when they issued a statement saying they had “amicably agreed” not to go ahead with any deal.
Kraft Heinz had tabled what the Financial Times claimed was a £115bn bid for Unilever, which was rejected, but had been widely expected to come back with a better offer. The CEOs of both companies had been in talks up until early yesterday afternoon, according to multiple reports, before Kraft Heinz realised no deal was going to be possible.
READ MORE: Kraft Heinz Unilever deal – Good business or bad move?
There will likely be many breathing a sigh of relief at the outcome. Jobs and factories both in the UK and the Netherlands would have been at risk no matter what assurances Kraft Heinz made. You only have to look at previous deals by Kraft Heinz’s private equity backer 3G and Kraft itself to see that.
Back when Kraft bought Cadbury it promised a factory in Bristol would stay open then promptly closed it. Over at Heinz, 3G fired most of the executive board and cut 7,000 jobs after buying the company in 2013. It was a similar story during InBev’s hostile takeover of Anheuser-Busch; it was led by 3G and saw 1,400 jobs quickly cut.
The business models of 3G and Unilever’s shareholders could not be more different. 3G is focused on cost cutting and streamlined budgeting. That does result in profitability, and AB InBev has been widely praised for its productivity and leanness; but that comes at the expense of jobs and corporate culture.
That could not be more different to Unilever. Paul Polman, its CEO, has made a point of telling shareholders that if they are not on board with the company’s focus on sustainability they should take their money elsewhere.
Unilever is bound up in its beginnings as a company focused on improving hygiene in the late 1800s by making soap available to the masses. Polman has long argued the case that it is brand purpose and corporate sustainability that are key to long-term growth.
That is why the company spends millions marketing and building brands focused on how they can help society whether that is Hellman’s, Knorr or Dove. And why it constantly talks up the fact that its sustainable brands grow 30% faster than the others in its portfolio.
The focus on brand building and sustainability can be seen in some of the most influential company rankings. According to Radley Yeldar’s brand purpose ranking Unilever comes top; Kraft Heinz is nowhere to be seen. And in FutureBrand, a measure of consumer perceptions of companies, Unilever comes in at number 31 compared to Kraft Heinz at 55.
Meanwhile, in Barron’s most admired companies ranking Unilever is at number 16, ahead of Kraft Heinz at 25. In Fortune’s Unilever is number 41, while Kraft Heinz does not appear.
These are two firms that see building a company from opposite ends of the spectrum. Aligning their goals would have been nigh on impossible and likely a disaster for Unilever. Brands would have been consolidated, jobs (including in marketing) cut, a corporate culture focused on sustainability and innovation lost and anything not core to growth cut.
That is not to say changes are not needed at Unilever. It has made moves to become more efficient, for example by introducing zero-based budgeting, but more is still needed. The spreads business, as well, needs to go. But Unilever is worth more than Kraft Heinz can offer, both monetarily and to society.