Unilever ramps up nutrition portfolio targets and performance reporting after investors turn up heat on health

07 Mar 2022 --- In recognition of mounting pressure from its investors, Unilever will be the first global food company to publicly report the performance of its product portfolio against at least six different government-endorsed Nutrient Profile Models (NPM) as well as its own Highest Nutritional Standards (HNS).

In this move, Unilever will continue to stretch the nutrition targets for its portfolio as part of its Future Foods commitments, which were published at the end of 2020. This includes time-bound targets for plant-based sales, reduction of salt, sugar and calories, and increasing the sales of healthier “positive nutrition” products.

Unilever will publish the assessment on an annual basis both globally and for 16 key strategic markets and will report its performance both by volume of product and by sales revenue.

Its first report will be published by October 2022.

The Access to Nutrition Initiative discovered last year that just 17% of Unilever’s food and beverage sales were derived from healthier products.This move also comes just weeks after Unilever confirmed a major restructure that could potentially see the offloading of some of its global food brands, as the company narrows focus on its ice cream segment and personal care business – which includes brands like Dove, Comfort, Lifebuoy and Rexona. Furthermore, the industry giant is cutting 1,500 management jobs across the business as part of this significant shakeup.

Pressure to ramp up health credentials builds
Earlier this year, an international coalition of institutional investors and individuals – led by responsible investment charity ShareAction – filed a shareholder resolution at the FMCG giant, urging the company to adopt ambitious targets to increase the share of healthy foods in its sales.

“A food manufacturer as large as Unilever has the power to improve the health of millions of people across the world. Responsible investors are challenging such companies to step up. We welcome Unilever’s new commitments,” remarks Catherine Howarth, CEO of ShareAction.

“The transparency promised sets a new standard for the industry. We hope and expect that others will follow. ShareAction and the Healthy Markets investor coalition look forward to working closely with Unilever as the company sets new targets to sell more healthier food – and improve people’s health.”

In response, regulators in many of Unilever’s largest markets are fast tracking an array of policy measures aimed at reducing sales of less healthy food and drink products, while products high in sugar and calories are already being taxed in 50 jurisdictions worldwide – more than have carbon taxes, as highlighted by ShareAction.

Some of Unilever’s biggest brands include Ben & Jerry’s, Magnum and Hellmann’s, Knorr and Lipton.

The investors argue that Unilever’s “dominant focus on sales in product categories such as ice cream and frozen desserts” carries “significant exposure to regulatory risk worldwide”, while missing opportunities for growth in healthier products and categories. Unilever did in fact report “steady growth” in its Foods & Refreshments segment in its half-year 2021 results, bolstered by ice cream growth.

Unilever is not alone in feeling the heat of increasingly health-conscious attitudes among industry stakeholders. Last year, Tesco became the first FTSE100 company to be hit with a shareholder resolution on health grounds. Following this, the British supermarket chain set a target to increase the proportion of sales from healthier products in the UK to 65 percent by 2025.  

The investors argue that Unilever’s “dominant focus on sales in product categories such as ice cream and frozen desserts” carries “significant exposure to regulatory risk worldwide.”Unilever falls short on healthy foods ratio
The Access to Nutrition Initiative, a benchmarking organization for food companies and their investors, discovered last year that just 17% of Unilever’s food and beverage sales were derived from healthier products.

This was a smaller proportion than many of its competitors, including Danone (61%), Nestlé (43%), Kraft Heinz (36%), General Mills (29%) and Kellogg (26%).

In 2020, Unilever reported that – using the company’s own definitions – 61% of its food and drink sales were derived from products with “High Nutritional Standards,” but investors still question its metrics, according to ShareAction.

“We welcome the constructive dialogue we have had with ShareAction and the Healthy Markets Initiative,” comments Hanneke Faber, Unilever’s president of Foods & Refreshment.

“We share a common belief in the importance of having an ambitious long-term strategy for nutrition and health, and that companies should publish ambitious targets to deliver against. I am confident that with these new initiatives, we will set a new benchmark for nutrition transparency in our industry and accelerate our positive impact on public health.”

Investors coordinated by ShareAction made similar requests at Unilever’s 2021 Annual General Meet, but the company has not made any significant commitments or progress since. 

The latest resolution represents a “marked escalation” in the investors’ engagement, ShareActions underlines. And it follows a similar investor-led call for action on all major food companies endorsed by 53 organizations with US$12.4 trillion in assets during the recent Tokyo’s Nutrition for Growth Summit.

Reaching toward benchmarks
Health is emerging as the next frontier in shareholder activism, driven by the rising social and economic costs of ill-health and the growth of associated regulation. 

In 2020, Unilever reported that – using the company’s own definitions – 61% of its food and drink sales were derived from products with “High Nutritional Standards,” but investors still question its metrics.Obesity rates have tripled since 1975, costing the global economy US$2 trillion or 2.8% of GDP each year, similar to the economic impact of smoking.

An article by chief executive of the Health Foundation, Jennifer Dixon, recently argued that poor health trends “Cannot be the result of a gradual loss of individual willpower to make healthy choices. Rather, it reflects the changing context within which individuals make choices, such as the greater availability and marketing of cheap, unhealthy food.”

Over the last year, Unilever has hiked up its efforts to expand its business partnerships and investments with a focus on health.

Last January, the company partnered with specialist Holobiome, securing next level access to the “microbiome vault” of knowledge about specific food ingredients that interact with key gut bacteria.

The F&B titan reports it will update its specific targets following their expiry at the end of 2022.

Unilever will continue to engage with ShareAction and investors from the Healthy Markets Initiative as these commitments are developed and implemented in the run up to its 2024 Annual General Meeting.

By Benjamin Ferrer