Investor sentiment is ‘in strong support’ of prioritizing sustainability goals: Unilever CEO

Unilever CEO Alan Jope joins Yahoo Finance’s Brian Sozzi at the 2023 World Economic Forum in Davos, Switzerland, to discuss climate change and the company’s sustainability goals, the company’s growth and outlook for 2023, inflation, CEO sentiment, and his impending retirement.

Video Transcript

DAVE BRIGGS Today marks the World Economic Forum’s first in-person meeting following a two-year absence. The event will bring together world leaders, business titans, politicians, and others. Brian Sozzi, Yahoo Finance’s Editor At Large, met with Alan Jope (Unilever CEO) to discuss climate change and the outlook on consumer staples.

BRIAN SOZZI Alan Jope, CEO of Unilever, will be joining me. Alan, it’s great to meet you in person. Another CEO I speak to without a jacket. Aren’t you guys cold?

ALAN JOPE You’re wrong. It’s great.

BRIAN SOZZI I know. I had to persevere here. Is that what brought you here to this World Economic Forum, though? What number of WEFs are you familiar with? What do you hope to get from this?

ALAN JOPE Yes, it is. It’s a place where you can listen, learn, and expand your worldview. It’s also a great way to meet your partners. This includes many of our business partners as well as civil society partners and some governments. This is a great way to save time. We do have an agenda.

Hanukkah Fabri, our President for Food, is driving an agenda to regenerative farming so that the food supply system is more sustainable. We also de-risk the system. Graham Pokethle, our CFO, is here to drive standardization of nonfinancial reporting because there is a danger that financial reporting becomes too complex and inefficient.

I drive plastic and recycling. So we meet to listen, discuss with partners and drive a few Unilever points.

BRIAN SOZZI Unilever struck me as a company with purpose, high focus on climate and a desire to do things differently. Is this important for you and your customers?

ALAN JOPE It all goes back to the DNA of our founders back in 1870s. William Lever spoke of making cleanliness more common and easing the burden on women. He was an early public servant for women’s health and rights. This legacy has remained with us.

Let me clarify: we are not an NGO. We’re a commercial organization. This is done in order to create value for shareholders. That is our ultimate goal.

The business case is quite clear: consumers choose sustainable brands at a preferable rate. We believe the investment covers costs. They do not increase the business’ cost. This reduces the risk. It is a magnet for young talent because it allows you to do business on a stable platform. These are the reasons we got into it. However, it is highly commercially driven.

BRIAN SOZZI What can you say to investors who claim that Unilever should be focusing on products? They have to stand up for something. What can you do to deal with this pushback?

ALAN JOPE First, most investors don’t hold that view. BlackRock wants to work with us to find out how you can follow a carbon reduction plan. Aviva is interested in learning how to improve the nutritional standards of your foods. Legal, in general, is working with Aviva to ensure fair wages in the value-chain.

The overall sentiment among investors is to place sustainability at the heart of the business. If you are more skeptical than me, there is only one solution: we must show that sustainability drives superior financial returns. We are not an NGO. We’re a commercial organization. So everything is driven from a business case.

BRIAN SOZZI Davos mood is darker than I expected. It was a TWC survey that said 73% expected the world to enter recession in 2012. Is that your opinion?

ALAN JOPE The world isn’t flat.

BRIAN SOZZI Wait, it’s not?

ALAN JOPE We are bullish on South Asia, not just India. Pakistan, India and Bangladesh are all doing well. Southeast Asia, Vietnam and the Philippines, Indonesia, Thailand, and the Philippines are all starting to rebound strongly. We witness extraordinary abilities to navigate the uncertainty in Africa, Latin America.

So far, the US consumer seems to be doing well. Europe is a more difficult place. Parts of the world will go into recession in 2011, I believe. However, we will choose not to pay attention to those areas of the world experiencing continued growth. And South Asia, Southeast Asia is at the core of all that.

BRIAN SOZZI Consumers are feeling the pinch from price increases by a number of consumer product companies. What price increases do you expect to see this year? Where is the portfolio located?

ALAN JOPE Yeah. We don’t want to raise prices when commodity–our input costs–go up. Instead, we look at efficiencies. We’ve actually asked our shareholders for some of the pain. Our margins are expected to fall in 2022. We have guided this.

However, eventually we will have to–we have had to pass along the price. We are likely at peak inflation, but not peak pricing right now. Yes, our supply chain is experiencing more cost and pricing will increase.

BRIAN SOZZI Are consumers trading down?

ALAN JOPE They’re not. Nielsen Take a look around our business – 35% is premium in the Unilever portfolio at a 120 index and above the market, 50% at the middle of it, and 15% in our value offering. Premium portfolio is the fastest growing segment.

It’s possible that there is down-trading in certain places. Although it’s not part of our business, it’s not the main focus. However, we make sure our portfolio has value offerings that will start to emerge.

BRIAN SOZZI You seemed to embrace your new activist investor, Nelson Peltz. I spoke with you last month 2 and 1/2 months ago. He said that he was doing a lot and has some good ideas to help this company get better results. Since then, Nelson has launched a campaign against Disney.

They do not share that perspective or approach. Nelson has been a friend and you are now embracing him.

ALAN JOPE Nelson Peltz, who joined our board in January, brought many great ideas. His vision of what the company should do aligns with our current agenda. Last year, a large part of our agenda was to simplify the organization. This was something he felt was necessary.

Unilever thought we would be a good board member if there was someone who has a track record in CPG. Of course, I cannot comment on the performance of other companies.

BRIAN SOZZI Are those meetings worth it? What are his thoughts?

ALAN JOPE Although I won’t be able to comment on one member of the board, we expect all members of the board to make contributions that guide the company in the right direction. Nelson is an experienced member of the board who is focused on performance and setting up the company’s future.

BRIAN SOZZI You also just returned from a key investor meeting. This was an excellent opportunity to present a slide deck. It seems like you’re driving Unilever’s re-imagination. You are where you need to be in this process.

ALAN JOPE We’ve been working on four main things over the past five years. First, we need to make sure that our executional muscle is strong. Second, we must continue to grow the portfolio. This includes exiting spreads and exiting T. Building a luxury beauty and health business has been an important part our growth plan.

Third, make sure everyone is clear about our strategic choices. Which markets are important? What categories do we care about? In what channels? Fourth, the most important part of reinventing Unilever is to change the organization’s structure from one that was complex to five with complete accountability and extreme simplicity. So now I only have five–I can either say throats are to choke or backs are to pat.

BRIAN SOZZI You should be retiring this year before I let you go. What’s next for your career?

ALAN JOPE Right now, I am 100% focused on Unilever. We need to keep producing quarter after quarter. It’s my job. I have very, very diverse interests that go beyond my business work. It will also give me some time to pursue those interests.

BRIAN SOZZI What about the rest of us?

ALAN JOPE There will be some travel. I’ll have the chance to complete my around the world motorcycle ride. This is still in the planning stages.

BRIAN SOZZI Keep safe and don’t forget a jacket. Alan Jope, CEO of Unilever, it’s good to see you back.

ALAN JOPE Thank you.

BRIAN SOZZI Enjoy the rest of Davos.

ALAN JOPE You bet.