Unilever pivots to beauty and personal care to close valuation gap

Unilever is undergoing a strategic restructuring to shed its food assets and focus on higher-margin sectors, including beauty, personal care, and home products. This move aims to close a valuation gap between the company and more focused competitors. Currently, Unilever trades at 11.5 times enterprise value to core earnings, significantly lower than peers such as L’Oreal, Procter & Gamble, and Coca-Cola.

A key component of this transition is the merger of Unilever’s food business with US spice maker McCormick. This transaction will leave Unilever with an approximately 10 percent stake in the combined entity, while shareholders will hold roughly 55 percent. While the shift reduces exposure to high-margin food businesses, proponents suggest the company’s deep presence in emerging markets—where 60 percent of revenue is sourced—provides a competitive advantage and long-term growth potential.

Investors remain cautious, noting that the company needs to demonstrate consistent volume growth to overcome the ‘conglomerate discount’ and prove that the streamlined focus can deliver higher returns.