Unilever sells slow-growing brands like Q-tips to private equity group

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Unilever has announced it will sell a group of more than 20 brands including Q-tips, Timotei shampoo and Impulse body spray to private equity group Yellow Wood Partners, the latest in a series of sales of its slower-growth labels. 

The disposal of the brands, which were grouped together under the name Elida Beauty in 2021 and generate approximately £700mn in annual turnover, is the first under Unilever’s new chief executive Hein Schumacher, who has set out to streamline the consumer goods giant’s portfolio following investor pressure to boost growth. 

The value of the deal was not disclosed.

Schumacher, who stepped into the role in July this year, said in a recent trading update that he would focus on improving the profitability of Unilever’s top 30 brands that make up 70 per cent of group revenues. The group currently has about 450 brands spanning food, toiletries, cleaning products and ice cream.

The sale is the latest in a string of disposals of slower-growth brands to private equity groups, including the sale of its tea business, Ekaterra, now Lipton, to CVC last year, and its spreads business, Upfield, to KKR in 2018.

Unilever reportedly tried to sell Elida when the brands were isolated from the rest of the portfolio in 2021, but the deal fell through. The Magnum and Marmite maker has also reportedly considered the sale of some of its North American ice cream brands, excluding Ben & Jerry’s and Magnum.

Yellow Wood Partners invests exclusively in the consumer industry and previously acquired Unilever’s low-cost shampoo and moisturiser brand, Suave, in North America. In 2021 it acquired footcare brand Scholl from Reckitt.

Bernstein analyst Bruno Monteyne said the acquisition was “a step in the right direction,” and would “help to shift Unilever’s portfolio out of underperforming categories and brands”, but that investors were yet to see evidence that the company’s turnaround plans were working.

Unilever has been criticised for a period of disappointing performance over the past decade, as well as for its acquisition mis-steps, including its botched bid for GSK and Pfizer’s consumer health division in 2021 and its acquisition of Dollar Shave Club in 2016, which it sold this year.

The group was as a result left vulnerable to targeting by activist investor Nelson Peltz, who joined the Unilever board last year and is, according to Schumacher, supportive of his growth plan.

During its last trading update, Unilever said it would not carry out any “major or transformational” acquisitions, but would instead “selectively optimise the portfolio”. Investors have speculated over the past few years as to whether Unilever will spin off an entire low-growth division like nutrition or ice cream.

“This marks another step towards the optimisation of our Personal Care portfolio,” said Unilever’s president of personal care, Fabian Garcia. 

“Our priority is to step up the growth of our Power Brands by investing behind key strategic focus areas such as driving unmissable brand superiority and scaling multiyear innovations.”

Unilever said the completion of the sale of Elida Beauty was subject to regulatory requirements and was expected to be completed by the middle of next year.

Via

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