Investment management firm Artisan Partners, which manages approximately $146 billion, has taken a prominent role in shareholder activism in the consumer goods sector. Artisan, which owns a 7% stake in Danone, pushed for changes in the French food giant’s board and leadership, leading to the ousting of CEO and chairman Emmanuel Faber. Artisan’s David Samra indicated that further changes could be on the horizon, particularly at the senior levels, due to Danone’s underperformance.
The Challenge of Underperformance
Danone is not alone in its struggle with underperformance. Unilever and other major competitors have also faced difficulties, lagging behind the EURO STOXX Consumer Products and Services EUR Price index. Consumer goods companies typically maintain low levels of debt and generate cash, providing opportunities for activist shareholders to initiate changes like cost-cutting, brand divestments, and operational improvements. Billionaire activist fund manager Nelson Peltz recently secured a seat on Unilever’s board, becoming the company’s fourth-largest shareholder.
Artisan’s Perspective on Unilever
Artisan’s Samra views Nelson Peltz’s presence on Unilever’s board positively. Artisan acquired a $900 million stake in Unilever during the second quarter of this year. While Artisan is not actively pursuing changes at Unilever due to Peltz’s involvement, Samra’s confidence in Peltz suggests potential transformations at the consumer goods giant.
Clearway Capital’s Approach
Clearway Capital, a Frankfurt-based fund, has been evaluating consumer companies, searching for those with strong brands and pricing power that can mitigate the impact of high inflation. The fund is open to engagement with companies whose management appears to undervalue their products and is considering advocating for management changes in some cases.
More Opportunities Ahead
With the changing business environment due to factors like supply chain disruptions, margin pressures, and slow growth, there are expected to be more opportunities for activist investors in the global consumer staples sector. While some executive departures have been driven by lifestyle changes post-pandemic, others reflect a need for a different leadership style to address these challenges.
Peltz’s Influence and History
Nelson Peltz has a history of influencing consumer-oriented firms, such as H.J. Heinz, and has pushed for changes like CEO appointments and business restructuring. Peltz’s presence on Unilever’s board has brought about leadership changes, but some details of his influence remain undisclosed.
The CEO’s Evolving Role
CEOs who navigated the pandemic crisis might not be the ideal leaders for fostering growth in the current environment, where challenges differ from those during the pandemic. The changing landscape may require a different kind of leadership that can adapt to supply chain disruptions, increased competition, and evolving consumer demands.
The Unilever Case
Unilever’s former CEO, Alan Jope, announced his departure in September 2022, several months after Peltz joined the board. Peltz had approached former consumer goods CEOs as potential candidates for the Unilever CEO role, ultimately leading to Hein Schumacher’s appointment.
The Impact of Activism
While activist involvement can sometimes be contentious, it has led to significant changes in several companies, including leadership alterations, cost-cutting measures, and improved shareholder value. As the consumer goods sector faces ongoing challenges, activist investors are likely to continue seeking opportunities for improvement.