5A. DISAGREEMENT Investment Star Terry Smith Attacks Unilever For Ludicrous' Focus On Social and Green Issues

1/14/22, 11:28 AM Investment star Terry Smith attacks Unilever for ‘ludicrous’ focus on social and green issues
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Investment star Terry Smith attacks Unilever for ‘ludicrous’ focus
on social and green issues
Consumer goods giant has 'lost the plot' and should worry more about profits, fund
manager warns
By Sam Benstead
11 January 2022 • 7:52pm
592
One of Britain's best known investors has attacked Unilever for its "ludicrous" focus on
sustainability, in a sign of growing City frustration at blue chip companies championing
fashionable causes.
https://www.telegraph.co.uk/investing/funds/investment-star-terry-smith-attacks-unilever-ludicrous-focus/ 1/8
Terry Smith, manager of the £29bn Fundsmith Equity fund, said that the consumer goods
behemoth has become "obsessed" with its public image and mocked its efforts to imbue
brands such as Hellman's mayonnaise with a higher purpose.
He said this overzealous focus on environmental and social issues has proved a distraction
at a time when the £101bn maker of products from Vaseline to Marmite is struggling with
a falling share price.
In a letter to investors in his fund, Mr Smith said: “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).”
Mr Smith said “ the most obvious manifestation” of this was how Unilever-owned Ben &
Jerry ’s ice cream refused to supply the West Bank.
In July last year, Ben & Jerry ’s said it was inconsistent with its values for the product to be
sold in the "Occupied Palestinian Territory", sparking a backlash from the Israeli
government.
Environmental, social and governance – ESG – considerations are now a key part of the
investment agenda, with fund managers falling over themselves to launch sustainable
strategies and companies keen to promote their ethical credentials.
Unilever in particular has long seen itself as a leader in this field.
In 2019, its chief executive Alan Jope vowed that “in the future, every Unilever brand will
be a brand with purpose” and said he would offload those that “are not able to stand for
something more important than just making your hair shiny, your skin soft, your clothes
whiter or your food tastier ”.
Mr Smith is not the only investor concerned about financial performance at a time when
management attention might appear to be elsewhere
In the past year, shares have fallen 9pc when the UK market has risen 11pc, while pre-tax
profits have fallen for two consecutive years from €12.4bn (£10.3bn) in 2018 to €8bn in
2020.
Unilever share price change since 2017
From 12 Jan '17 to 11 Jan
80%
60%
40%
20%
0.0%
2018 2019 2020 2021 2022
⬤ Unilever PLC: 2861.9 → 3942.0 37.7%
More share information on
Profits were 4pc lower in the first half of 2021 than a year earlier, with the company
blaming the drop on higher raw material costs and increased marketing spend. It said
overall profit margins in 2021 would be similar to the previous year's.
Unilever sold its PG Tips and Lipton tea brands, excluding its businesses in India, Nepal
and Indonesia, for €4.5bn last year to private equity buyers. Sales of tea had been
declining in recent years as consumers increasingly opted for coffee.
Mr Smith - the son of an East End lorry driver who rose to become one of the country's
best-known stock-pickers - still owns Unilever shares, despite underwhelming returns.
He said: “Although Unilever had by far the worst performance of our consumer staples
stocks during the pandemic, we continue to hold the shares because we think that its
strong brands and distribution will triumph in the end.”
Terry Smith has made investors around 18pc a year since 2010
Fundsmith Equity MSCI World
700
600
500
400
)%( nruter latoT
300
200
100
-100
2012 2014 2016 2018 2020 2022
FE FUNDINFO
Unilever is also owned by Nick Train, another star fund manager known for backing
companies with strong brands in reliably growing industries.
Writing to investors in November, he also declared his disappointment in performance
but said he continued to support the company.
Mr Train said: “ Unilever comprises a collection of some great, some very strong and, yes,
some mediocre consumer brands – all sold across a truly global footprint with a uniquely
high exposure to emerging markets.
"This combination is not in favour currently and understandably so.”
He added that Unilever was a good company to own for income seekers. Shares currently
yield around 4pc.
Mr Train said Unilever could yet surprise investors with growth from new business lines
because it is partnering with hundreds of technology firms exploring areas such as plant-
based proteins and biotechnology for cleaning.
He said: “ Who is to say this company won’t be able to sustain that rate of underlying cash
return growth to shareholders, with these and other initiatives? It has done so for over
half a century.”
Mr Smith, who is based in Mauritius, has sold out of three British companies in the past 12
months - Sage, Intertek and InterContinental Hotels - and now has just 4.7pc invested in
UK-listed shares.
His largest investments are in American technology stocks, such as Microsoft, Meta
Platforms (formerly Facebook), and PayPal.
He added Amazon to his portfolio for the first time last year, defending a decision to buy
the stock after previously declining to do so by saying “'better late than never', or at least
it will be if our purchase delivers the performance we expect ”.
Fundsmith Equity's largest investments
Stock
Microsoft
IDEXX
Novo Nordisk
L'Oreal
Estee Lauder
PayPal
Meta Platforms
Intuit
Stryker
Fundsmtih
The fund manager also dismissed criticism of his fund's charges of more than 1pc as
"twaddle" and said investors should instead focus on his performance
His flagship strategy returned 22pc in 2021 compared with 23pc for global stock markets,
but is up 571pc since its launch in 2010 compared to a 287pc rise in shares.
Accounts filed in December showed that Mr Smith was in line for an annual payout of up
to £150m.
Unilever declined to comment.
Comment: Patience with Unilever spread thin
By Ben Marlo w, Chief City Commentator
Marmite has been dividing people for decades but with parent company Unilever trying
to force its green evangelism down customer ’s throats, perhaps it will soon have to adopt
the “love it or hate it ” slogan at a corporate level. Eventually it may just be the latter
bracket.
Boss Alan Jope believes that consumers want to know how brands are “making society
and the planet a little better ”. That ’s debatable.
Most people have a social conscience but few want to be lectured on how to save the
world when they are sitting down for breakfast, lunch or dinner with the family, nor do
they demand that every brand has a “social purpose”. They just expect, not unreasonably,
big companies to behave properly and operate responsibly.
Even middle England’s favourite long-term investor Terry Smith has finally had enough,
accusing Unilever of losing the plot. As Smith points out in a withering statement,
people worked out long ago what mayonnaise is for: “salads and sandwiches”.
Management “is obsessed with publicly displaying sustainability credentials at the
expense of focusing on the fundamentals of the business”, he says. With major
shareholders losing patience, the company ’s do-goodery may have a short shelf life.
Related Topics
Retail and Consumer industry,
Unilever,
Funds,
Income investing
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1/14/22, 11:28 AM Investment star Terry Smith attacks Unilever for ‘ludicrous’ focus on social and green issues

See all Money

Investment star Terry Smith attacks Unilever for ‘ludicrous’ focus

on social and green issues

11 January 2022 • 7:52pm

sustainability, in a sign of growing City frustration at blue chip companies championing

brands such as Hellman's mayonnaise with a higher purpose.

a falling share price.

Jerry ’s ice cream refused to supply the West Bank.

strategies and companies keen to promote their ethical credentials.

Unilever in particular has long seen itself as a leader in this field.

whiter or your food tastier ”.

management attention might appear to be elsewhere

Unilever share price change since 2017

From 12 Jan '17 to 11 Jan

2018 2019 2020 2021 2022

⬤ Unilever PLC: 2861.9 → 3942.0 37.7%

More share information on

overall profit margins in 2021 would be similar to the previous year's.

declining in recent years as consumers increasingly opted for coffee.

best-known stock-pickers - still owns Unilever shares, despite underwhelming returns.

strong brands and distribution will triumph in the end.”

Fundsmith Equity MSCI World

2012 2014 2016 2018 2020 2022

companies with strong brands in reliably growing industries.

Writing to investors in November, he also declared his disappointment in performance

but said he continued to support the company.

high exposure to emerging markets.

"This combination is not in favour currently and understandably so.”

yield around 4pc.

based proteins and biotechnology for cleaning.

Platforms (formerly Facebook), and PayPal.

it will be if our purchase delivers the performance we expect ”.

Fundsmith Equity's largest investments

"twaddle" and said investors should instead focus on his performance

Unilever declined to comment.

Comment: Patience with Unilever spread thin

By Ben Marlo w, Chief City Commentator

and the planet a little better ”. That ’s debatable.

big companies to behave properly and operate responsibly.

accusing Unilever of losing the plot. As Smith points out in a withering statement,

Management “is obsessed with publicly displaying sustainability credentials at the

expense of focusing on the fundamentals of the business”, he says. With major

Please review our

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