Sep 11, 2023

Activist investors eye food, consumer goods 5-day change Today at 01:00 am Share LONDON, Sept 11 (Reuters) - In early 2021, investmentmanagement firm Artisan Partners sent an open letter to anincoming member of Danone's board, saying it had builta stake of more than 3% in the French food giant. "On almostevery measure, Danone's performance has lagged," Artisan said,and called for change. About a month later, Danone's then-CEO and chairman,Emmanuel Faber, was ousted and its board overhauled in a highprofile victory for shareholder activism. Today, Artisan, which manages about $146 billion, isDanone's top shareholder with a 7% stake, according to LSEGdata. David Samra of Artisan's International Value team, whichseeks investment opportunities in under-valued businesses, saidmore changes may be coming. "I wouldn't be surprised if there's more turnover at thevery senior levels," Samra told Reuters, noting the "verymediocre" performance of Danone shares. "If somebody is notperforming, we will get new people." Danone, the maker of Activia yogurt and Evian bottled water,did not respond to a request for comment. The company's stock has declined around 13% in the past twoyears. Unilever and other large rivals have alsounderperformed the EURO STOXX Consumer Products and Services EURPrice index over the past year. Reuters spoke to four shareholders that have launchedactivist campaigns who said that some big consumer goodscompanies are ripe for executive changes after failing toimpress. The sources declined to name specific companies, insome cases because they work with them. Data shared exclusively with Reuters by consultancy Alvarez& Marsal also showed that, in the first seven months of theyear, the consumer goods industry was the most targeted byactivist investors. Some 236 campaigns were launched globally between Januaryand July, the most the industry has seen in at least half adecade, Alvarez & Marsal said. That represented a fifth of all activist pushes across allsectors during that period. Alvarez & Marsal did not identifythe targets of the campaigns nor say what they were about. Many large consumer goods companies generally hold lowlevels of debt and are cash generative, said André Medeiros,managing director and Alvarez & Marsal's EMEA consumer andretail leader. Their scale also often offers activistshareholders multiple levers to pull - including cost cutting,brand divestments, operational improvement and the adoption ofnew technology - as they look for growth and higher margins, headded. Billionaire activist fund manager Nelson Peltz took a seaton Unilever's board in July 2022, having praised the maker ofDove soap and Ben & Jerry's ice cream for its strong brands andinternational footprint. His New York-based fund Trian is nowthe company's fourth-biggest shareholder, according to LSEGdata. Artisan's Samra said Peltz's presence at Unilever gavehim "confidence". Samra's fund has built a roughly $900 millionstake in Unilever, having bought shares during the secondquarter when the price declined, Artisan told Reuters. The stakewould make it Unilever's 13th largest shareholder, the LSEG datasaid. "We're not active with Unilever. We don't need to be becauseNelson Peltz is doing it," Samra said. Peltz is known for his interest in consumer-oriented firmsand for his role in reshaping H.J. Heinz as well as engineeringthe break up of Cadbury Schweppes. Shortly after his arrival onthe board, Unilever appointed a former Heinz executive as CEO. Unilever's food business has struggled with slow growth foryears, fuelling speculation it could be spun off. Unilever andTrian declined to comment for this story. 'ADVOCATING FOR MANAGEMENT CHANGE' Gianluca Ferrari, founding partner of investor ClearwayCapital, said his firm had some consumer companies on its radarbut declined to name them. The Frankfurt-headquartered fund doesnot publicly disclose its assets under management. With inflation running high in many economies, Clearway islooking for companies with strong brands and potential pricingpower that would help to insulate them from it. "If we feel the board and management are underpricing theirproducts, that's a perfect reason for us to go in and take avery close look at a business with the intention of engaging,"Ferrari said. "There is one situation that we're having a very closelook at where I think advocating for management change wouldprobably be the right thing to do," he added. Clearway last year pushed for change at sports supplementmaker Glanbia. Since Clearway's letter to Glanbia'sboard in May 2022 calling for a break-up of the company to helpunlock value, the Irish company's share price has jumped about39% and its longtime CEO plans to retire. Glanbia did not respond to a request for comment. At the end of 2020, Bluebell Capital also bought a stake inDanone and, according to media reports, joining Artisan inlobbying for the removal of then-chairman and CEO Faber.Bluebell declined to comment on its engagement. "Danone was significant because there is less of a historyof activism in consumer staples in Western Europe, and it was aCEO change led by shareholders -- there was probably too muchcomplacency from the board," Nicolas Ceron, a portfolio managerat Bluebell, told Reuters. He declined to confirm if Bluebell, which does not discloseits assets under management, still held a stake in Danone. Ceron said that, although boards had become quicker totackle underperformance, he saw a number of situations amongconsumer staples companies where things could be improved. "There are more opportunities in global consumer staples foractivists over the coming years, but the timing has to beright," Ceron said. He did not cite specific companies. ROOM FOR IMPROVEMENT Several top industry executives - including at Diageo, Reckitt, Danone and Kraft Heinz- announced over the past year they are stepping down. In some cases, the departures have been driven by theexecutive's desires for a change of lifestyle in the wake of theglobal pandemic, said Andrew Hayes, global head of executivesearch firm Russell Reynolds Associates' consumer practice. Some companies, however, felt that the business environmentin the wake of the pandemic - characterised by supply chainissues, squeezed margins and slow growth - required a new kindof leadership, according to John Long, North America retailsector leader for rival search firm Korn Ferry. "The CEOs that were able to navigate a crisis like thepandemic are not necessarily the same people who can fostergrowth," Long said. He did not identify specific executives nordisclose the nature of his work with consumer companies. Unilever's former CEO Alan Jope departure's after 38 yearsat the company was announced in September 2022, months afterPeltz joined the board in July. Unilever's longtime financechief, Graeme Pitkethly, is also exiting by May 2024 after morethan two decades at the company. Peltz did not respond to a request for comment onwhether he influenced Jope's departure. In October, Reuters reported that Peltz had approachedformer CEOs of consumer goods companies as candidates for theUnilever top job. When Hein Schumacher was appointed, Peltz saidhe had been "impressed by his leadership skills and businessacumen" when he had known him at Heinz. Peltz in 2006 also won two seats on the board of H.J. Heinz- now Kraft Heinz - after waging an acrimonious, costly proxybattle. Reflecting on the experience, Heinz's then-CEO, BillJohnson, told Reuters: "Nelson turned out to be a greatcontributor even though there were times we disagreed on issuesand sometimes it got rather rancorous." "We all like to think as CEOs that we're above that," hesaid. "But there's no company in the world that's safe." (Reporting by Richa Naidu; Editing by Matt Scuffham and DanielFlynn) Share