On December 19th, Unilever announced on its official website that it had received a binding offer from American private equity firm Yellow Wood Partners LLC to acquire Elida Beauty. This means that Unilever has finally shed the burden of its slow growing Elida Beauty business.
The financial terms of this transaction have not been disclosed yet and are expected to be completed by mid-2024. It is reported that Elida Beauty was established in 2021, and the business unit owns more than 20 beauty and personal care brands, including Q-Tips, Ponds, Caress, Timotei, TIGI, etc. The business's revenue in 2022 is approximately 800 million euros.
Regarding this acquisition, Fabian Garcia, President of Unilever Personal Care Business, stated, "This marks another step towards optimizing our personal care product portfolio." Fabian Garcia stated that the primary task is to accelerate the growth of our strong brand by investing in key strategic focus areas, such as driving unmissable brand advantages and expanding years of innovation.
At this point, Unilever has carried out multiple asset disposals this year, making efforts to continue reducing costs in order to solve the problem of performance growth. Regarding sales and other related matters, the official customer service personnel of Unilever told a reporter from Huaxia Times on December 22 that they have not received any relevant information and cannot respond. They will truthfully record the feedback. The reporter sent an interview letter to Unilever, but as of the time of publication, no response has been received.
Continuously slimming down
Due to Elida Beauty's poor performance and Unilever's previous actions to sell the business unit, this bundled sale has also been referred to as "shedding the burden" by industry insiders.
According to Unilever's latest financial report data, its revenue in the third quarter decreased by 3.8% year-on-year to 15.2 billion euros (approximately 117.888 billion yuan). Among them, the revenue of the beauty and health sector decreased by 4.9% year-on-year in the third quarter, to 3.1 billion euros (approximately 24.043 billion yuan); The revenue of the personal care sector was 3.6 billion euros (approximately 27.921 billion yuan), a year-on-year decrease of 2.2%. Elida Beauty belongs to the personal care division of Unilever,
Unilever first attempted to divest Elida Beauty in 2021, but after other consumer goods companies selected individual brands for sale, their pricing did not meet their valuation expectations. Later that year, the process was cancelled. The sales process was restarted in September. Until Yellow Wood became the winner of this business auction.
Yellow Wood Partners partner Tad Yanagi said, "We are delighted to collaborate with the Elida Beauty team to lead these brands into the next phase of growth and expansion. Consumers around the world love these brands because they are an important part of their daily lives."
According to the above announcement, binding offers are subject to the usual transaction conditions, regulatory requirements, and consulting processes. The financial terms of this transaction have not been disclosed and are expected to be completed by mid-2024.
If the sale is successfully completed, it will be Unilever's first major move since the new CEO takes office. On July 1, 2023, former CEO of Unilever, Alan Jope, officially handed over to baseball director Hein Schumacher, ending his tenure as CEO since 2019.
Jiang Han, a senior researcher at Pangu Think Tank, told a reporter from Huaxia Times that the reason Unilever sold its non core beauty and personal care businesses to American private equity companies is to optimize its business structure. Selling non core business departments can help the company focus more on core business, improve overall operational efficiency, and alleviate financial pressure. By selling its business, Unilever can obtain certain funds to repay debts or invest in other areas to alleviate financial pressure. At the same time, divesting non core businesses is also to better respond to market competition and increase market share.
Brand positioning expert and founder of Fujian Huace Brand Positioning Consulting, Zhan Junhao, analyzed to a reporter from Huaxia Times that the sale of Unilever is a normal strategic adjustment of the company. In the global daily chemical industry, Unilever is a leading enterprise, and acquiring or selling certain businesses is a normal commercial behavior.
"For such industry giants, what is more important is the business with potential in the future. If the future potential is limited and the current performance is not ideal, it may be sold. If the non core business sale is completed, it will be equivalent to slimming down and reducing fat for Unilever, investing more resources, manpower, and material resources into more promising business in the future, and enabling the enterprise to achieve more stable development," said Zhan Junhao.
In fact, in recent years, Unilever has sold multiple assets. The acquisition of Elida Beauty will also be Yellow Wood's second acquisition of a non core brand from Unilever within a year. In May of this year, Yellow Wood acquired Suave, a personal care brand under Unilever.
In addition, in October of this year, Unilever announced the sale of the men's care brand Dollar Shave Club to US private equity firm Nexus Capital Management LP. However, Unilever will still retain a 35% stake in the brand, and according to trading conventions, the transaction will be completed this year.
Accelerate cost reduction
Unilever is a British daily chemical conglomerate that can be considered a global consumer goods giant, with over 2000 brands at its peak. Among them, there are well-known brands such as Dove Shower Gel, Clear Shampoo, Mysterious Laundry Detergent, Jinfang Softener, and Helu Snow Ice Cream.
Behind "slimming down", Unilever now has over 400 brands worldwide. In recent years, its performance has not been satisfactory, with high costs under pressure, slow growth, and also facing issues such as brand aging.
According to the latest financial report, Unilever's basic sales increased by 5.2% in the third quarter of this year; Price increase of 5.8%; Sales decreased by 0.6%; The turnover was 15.2 billion euros (approximately 117.368 billion yuan), a year-on-year decrease of 3.8%. And in the third quarter, its entire business declined. In the first half of the year, its basic sales increased by 9.1%, with prices increasing by 9.4% and sales declining by 0.2%.
Prices have risen, sales have declined, and Unilever is in an awkward situation.
Regarding this performance, CEO Ma Han also admitted in the financial report, "In recent years, Unilever's performance has not reached its potential. Our growth quality, productivity, and returns have not met expectations. We will improve our performance by strengthening investment in innovation and branding, as well as utilizing our operating model."
"Over the past 6 years, our sales growth (reflecting the quality of our business growth) has been lagging behind, making it difficult to achieve and maintain our competitiveness at the expected level. Our gross profit margin is declining, and earnings per share growth has also come to a standstill." Sima Han said, which has also led to the company's overall shareholder return not meeting the target. Remedying this and bringing Unilever's shareholder return back to the top level in the industry is the top priority. Therefore, Unilever needs to take action in three directions: "accelerating growth", "productivity and simplification", and "performance culture".
Selling assets is also seen in the industry as a major measure by Unilever to address a series of issues. Jiang Han believes that this to some extent reflects Unilever's practical need to improve its performance by selling non core businesses.
In Jiang Han's view, one of the reasons for the decline in Unilever's performance is fierce market competition, facing pressure from competitors such as Procter&Gamble and L'Oreal. In fact, changes in market demand are also the reason for its decline in performance. Consumer demand is gradually shifting towards natural, organic and other directions, leading to a decline in sales of some products. In addition, the rising cost pressure has also squeezed its profit margin, and the rise in raw material prices has led to an increase in production costs.
In order to shift costs and offset the impact of raw material inflation and rising production and logistics costs, Unilever has launched a crazy price increase.
Unilever CFO Graham Petterley once stated in his 2022 annual report that the company currently only covers 75% of cost inflation and expects pricing to continue to rise in 2023.
But the data shows that relying solely on price increases cannot solve performance problems. How can Unilever go further by using price increases to support performance? Unilever has also publicly stated a slowdown in price growth.
In addition, Unilever also needs more strategies to face the problem of declining performance. Is selling assets not the first time, will it be the last time?