City fund manager Smith blasts Unilever for putting purpose above profit

Purpose may be taking over marketing but it doesn’t have quite so many fans in the financial world.

Fund manager Terry Smith, founder of Fundsmith Equity Fund and a big investor in Unilever, says: “Unilever seems to be labouring under the weight of a management which is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business.”

He goes on to say: “a company which feels it has to define the purpose of Hellmann’s mayonnaise has, in our view, clearly lost the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert — salads and sandwiches).”

In the past year Unilever shares have fallen 9% when the UK market has risen 11% per cent, while pre-tax profits have fallen from €12.4bn (£10.3bn) in 2018 to €8bn in 2020. In 2019 incoming Unilever CEO Alan Jope announced that “in the future, every Unilever brand will be a brand with purpose.”

Proponents of purpose would argue that, in a world preoccupied with issues like sustainability and climate change, consumers expect the brands they buy to be on the side of the angels. Even, perhaps, mayonnaise.

But it’s dawning on an increasing number of consumers (and voters) that such initiatives also carry a cost. the UK government is facing a growing rebellion over its green taxes which are playing a part in soaring energy bills.

Adland is almost wholly obsessed by purpose, to the extent that such ads hoover up most awards, to the extent that some shows now consign them to a category of their own. Agency managements find to difficult to find creatives who are willing and able to work on clients who just want to sell more product or build a brand image.

Fund manager Smith is no stranger to controversy, having made his name back in 1992 with his book Accounting for Growth: Stripping the Camouflage from Company Accounts, a withering account of company smoke and mirrors.

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