(Bloomberg) -- Unilever is hiring an external chief executive officer to replace Alan Jope in a shift that could signal a strategic shift for a company that many investors believe has lost its way.

Incoming CEO Hein Schumacher will have to contend with floundering growth, a bureaucratic culture and accusations that Unilever has become too obsessed with the so-called “social purpose” of the consumer products it sells. 

“Unilever is basically a brands business,” said Allan Leighton, a UK retail veteran who worked with Schumacher at clothing chain C&A and described him as pragmatic and straightforward. “In my view they’ve sort of moved off that recently and he will bring that back.” Leighton added that perhaps Unilever’s focus on the environmental, social and governance agenda had gone too far.

The 51-year-old boss of Dutch dairy cooperative Royal FrieslandCampina is likely to shake up top management and change how the business is organized to make leaders more accountable, driving growth. As an external candidate, he’ll have options that his predecessor and Unilever lifer Jope had rejected.

The debate over splitting food brands like Hellmann’s mayonnaise and Knorr stock cubes from the faster-growing personal care, beauty and wellbeing units is likely to reignite.

Investor frustration is understandable: Unilever shares have dropped 2% since Jope started as CEO in 2019, compared to a 55% gain at closest competitor Procter & Gamble and a 35% advance at Nestle. A mishandled attempt at a mega-merger and a backlash from investors over Ben & Jerry’s in Israel also grabbed many headlines.

Schumacher could change course on Unilever’s purpose agenda. Jope and his predecessor, Paul Polman, argued that household products with a social mission — such as empowering body confidence or promoting hygiene — perform better than those without. Some investors have derided that approach.

Yet as Terry Smith poked fun at the idea that mayonnaise could have a purpose, Hellmann’s became a €2 billion ($2.2 billion) global brand, showing Unilever’s ability to turn a jar of eggs, vinegar and spices into a big business. However, many investors want to see to see more sales growth from the company rather than arguments that Hellmann’s helps fight food waste because consumers can use it to dress up old leftovers. 

The CEO change will likely also kick start a broader overhaul of the board and potentially the replacement of Chairman Nils Andersen, 64.

Inflation Persists

Schumacher worked more than a decade at Heinz, but he’s spent his career higher up the supply chain more recently — in milk. FrieslandCampina is an €11 billion dairy cooperative, comprised of mostly local brands without institutional investors breathing down its neck. 

The agriculture business requires negotiation with stakeholders such as farmers, lawmakers and consumers. But it’s different to the maneuvering required to keep shareholders on the management’s side, especially when investors include Nelson Peltz, one of the most-feared activists.

That said, Carlsberg CEO Cees ‘t Hart was hired from FrieslandCampina and the brewer has performed relatively well during his tenure.

Schumacher’s diplomacy skills will come in handy when negotiating pricing with supermarkets in a cost-of-living crisis. The soft-spoken Dutchman will succeed Jope in July. Inflation may have peaked then but prices will likely keep rising, requiring a delicate balance of passing on price increases to protect profitability while also safeguarding market share from cheaper brands.

Smart marketing has helped some of Unilever’s brands fare better than others. For example, the leading positions of Magnum and Ben & Jerry’s meant it was able to both push up prices and drive volumes at the ice-cream unit in the first nine months of last year. Strengthening Unilever’s other brands, especially in food, to make them more resilient to higher pricing will take time.

String of Sagas

For Jope, who ran Unilever for four of his 37 years at the company, his tenure was dogged by a series of missteps that eroded investor trust. His fumbled approach for GSK’s consumer health unit, which became Haleon, led to Jope admitting the food brands lacked the growth potential he saw in the personal care brands. Schumacher will have to rebuild confidence in the food brands while continuing to pivot to products like skin creams, deodorants and vitamins. 

Ben & Jerry’s decision to stop selling its ice cream in the West Bank led to an unprecedented legal dispute with the subsidiary, which was only confidentially resolved in December.

Jope’s errors gave ammunition to investors who were fed up of Unilever pontificating about purpose at the expense of performance. His departure has echoes with the more dramatic ouster of Danone CEO Emmanuel Faber, who was also accused of overdoing the ESG agenda while underinvesting in brands and disappointing investors.

Schumacher seems to have Peltz on his side as the activist published a statement congratulating him on the new job. 

He might have a harder road to walk with others. Several declined to speak publicly. 

Bert Flossbach, who argued for a Unilever breakup or a new chair last year, was circumspect: “We are traditionally reluctant to give an advance assessment. We will talk to the management very soon to get a personal impression of him and the plans and goals.”

--With assistance from Lisa Pham, Cagan Koc, Katie Linsell and Sabah Meddings.

©2023 Bloomberg L.P.