No split for food division says Unilever

By Neil Merrett

- Last updated on GMT

Related tags Unilever

The chairman of Unilever has this week hit out at claims that the
group may divide into two separate entities for food and personal
care production to boost its operations.

Michael Treschow, who took the position just this month, outlined the strategy for his tenure of the company by playing down speculation of a split, during an interview with Dutch newspaper Het Financieele Dagblad. The group has come under growing pressure from rivals within food production over recent years as it looks to expand into new markets. This has fuelled speculation that Unilever may separate personal care production from its food and beverage unit to lift competitiveness within its individual operations. However, Treschow believes that such a strategy would not suit the company, suggesting that its diverse range of products were a key strength. "Product range plays an important role in this sector,"​ he said. "You get much more attention from retailers if you are a larger operator and can offer better conditions ... you lose advantages if you split things apart." ​This stance appears to have been vindicated by its performance during the first quarter of the year, which resulted in a 5.4 per cent rise in underlying sales to €9.5bn during the period. The growth failed to offset decreased margins for the period, which were down to 13.7 per cent from 14.7 per cent over the same period last year. These margins were attributed to when increased restructuring costs, designed to bring food production in line with the success of its personal care brands, took hold. This restructuring has meant some difficult decisions for the group, including shifting Bulgarian production to Romania, in a bid to solicit demand for its products in emerging markets like Eastern Europe. Aside from these difficulties, Unilever remains confident that operating under a single brand will see it maintain its growth ambitions for the future. "The combined benefit of organic growth in our 3-5 per cent guidance range and improved efficiency leaves us well placed to achieve our margin objectives for 2007,"​ stated Unilever's chief executive Patrick Cescau, commentating on its latest quarterly results. Not all within the industry share Unilever's view on operating across a number of product segments though. Earlier this year, confectioner Cadbury announced it was separating its confectionery and US soft drinks businesses, to boost performance and investment within each unit.

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