By DAVID GELLES, NY Times, FEB. 17, 2017
Talk about an odd couple.
■ Unilever, the Anglo-Dutch maker of Dove Soap and Lipton tea, has spent the last seven years working to reduce its carbon footprint, use more sustainable materials and promote global health.
Kraft Heinz, a recently assembled conglomerate selling its namesake macaroni and ketchup, is known for ruthless cost cutting, huge layoffs and relentless penny pinching.
■ Unilever is led by Paul Polman, a sustainability evangelist who considered joining the priesthood before becoming an executive.
Kraft Heinz is controlled by 3G Capital, a Brazilian private equity firm that has partnered with Warren E. Buffett to go on a deal making rampage.
■ Unilever stopped issuing short-term guidance, encouraged its shareholders to take the long view, and has taken pains to preserve the quirky cultures of acquired companies like Ben & Jerry’s.
Kraft Heinz and its backers have stopped at nothing to increase their clout, swallowing ever larger targets. 3G’s partners also control the world’s largest brewer, Anheuser-Busch InBev, which last year took over its nearest rival, SABMiller.
“They are radically different cultures,” said Mindy Lubber, chief executive of Ceres, which promotes responsible business practices. “Unilever is the most transparent and open company there is about sustainability being part of their mission. They see it being part of their business proposition.”
Kraft Heinz, by contrast, is among the companies least committed to sustainability, Ms. Lubber said. “Kraft Heinz doesn’t even release a sustainability report, which in the year 2017 is shocking for a multinational company.”
According to a 2015 study by Ceres that evaluated how big food companies managed water risk, Unilever was the most responsible steward of water needs. Kraft Heinz was among the worst performers.
None of this is lost on either company.
In its statement acknowledging the offer, Kraft Heinz extended an olive branch of sorts to Unilever, saying it wanted “to create a leading consumer goods company with a mission of long-term growth and sustainable living.”
The last two words of that statement are the essential ones. Unilever calls its overarching corporate strategy the Unilever Sustainable Living Plan. The goal is to cut the company’s environmental impact in half by 2020 from 2008 levels, improve the health of one billion people and double revenue.
Unilever struck the predictably disinterested posture of any company surprised by a takeover offer. “Unilever rejected the proposal as it sees no merit, either financial or strategic, for Unilever’s shareholders,” the company said in a statement. “Unilever does not see the basis for any further discussions.”
That may buy Unilever some time, but 3G is nothing if not determined. Anheuser-Busch InBev, another 3G creation, pursued SABMiller for a year before finally sealing the deal, raising its price and shedding assets along the way. SABMiller finally relented.
That deal, which closed only late last year, offers perhaps the closest analog to Kraft Heinz’s $143 billion offer for Unilever. During the negotiations, the specter of 3G’s famous cost cutting hung over the deal. And already, Anheuser-Busch is reducing head count in South Africa.
Whatever comes next will be a test for Unilever’s charismatic leader.
“Paul Polman has been out there as a leader on sustainability for over a decade,” said Ms. Lubber. “He’s accomplished extraordinary things, setting higher standards for how corporations should look at sustainability, as well as affirming that it is a core business imperative. He’s setting new standards every day while he’s keeping his company profitable and ahead of the curve.”
Aron Cramer, chief executive of BSR, an organization for companies that promote sustainable business practices, said much of Unilever’s success in recent years was the result of Mr. Polman’s leadership.
But he also noted that Mr. Polman has done an admirable job expanding the company’s sales in Asia, Africa and Latin America.
“They’ve done better than a lot of their competitors in terms of shifting their energies toward the global south,” he said.
And no matter what 3G says about sustainable living, the potential for growth in emerging markets may be the real allure.
Of course, if the deal gets made, there is a chance that the two companies could learn from each other.
Perhaps the financial wizards at 3G would bring some additional discipline to Unilever, which some analysts worry has been insufficiently focused on bottom line results. And perhaps Unilever could teach its new owners a thing or two about an idealistic corporate culture, ambitious sustainability goals and promoting consumer health. Perhaps.
Both sides are aware of the vastly different corporate cultures, and that could emerge as a sticking point in the negotiations.
But shareholders, even those committed to social and environmental responsibility, won’t ignore a truly generous premium.
“The culture there is strong, the leadership is strong and the board is strong,” said Mr. Cramer. “But if the shareholders say, ‘This is in our interest,’ the culture doesn’t necessarily matter.”