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.
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.