Fundsmith accuses Unilever of ‘virtue signalling’

London — British fund manager Terry Smith accused Unilever on Tuesday of “virtue signalling” with its ethically-focused marketing, in his latest salvo against the consumer goods giant.

Smith — whose Fundsmith  investment management company is Unilever’s 15th biggest shareholder, according to financial market data firm Refinitiv — also said in his annual letter to investors that the maker of Hellmann’s mayonnaise and Dove soap had for years ignored his fund’s advice on the need to improve performance.

Still, the company recently added activist investor Nelson Peltz to its board. Peltz, who co-founded investment firm Trian Partners, is known for reshaping management and has previously been on the boards of Ritz cracker-maker Mondelez International and tomato sauce-maker Heinz, now known as Kraft Heinz.

“Based on our experience, we tend to get ignored, whereas an activist who has held shares for fewer months than we have held in years gets invited to board meetings,” Smith wrote.

“I don’t know how long Trian held its stake before Mr Peltz was invited to join the board or how big that stake was, but I would guess that they held it for far fewer months than we have held it in terms of years.”

Yet Smith said he had “no objection to Mr Peltz’s involvement” and did not want a board seat.

Trian did not immediately respond to a request for comment.

Last year, Smith gave Unilever a dressing down for its failed £50bn ($61bn) bid for GSK’s consumer health assets and urged management to focus on improving performance.

He also attacked Unilever’s purpose-driven marketing, saying the company had “clearly lost the plot” in feeling like it “has to define the purpose of Hellmann’s mayonnaise”.

On Tuesday, Smith reiterated “we don’t know how well it [Hellmann’s] would have grown without the [virtue signalling] ‘purpose’”, adding that “maybe Hellmann’s would be growing as fast or even faster without its ‘purpose’”. The words virtue signalling were struck through in Smith’s letter.

Unilever, which didn’t comment, says on its website its 400 brands from Magnum ice cream to Sunsilk shampoo “are on a global mission to do good”. Many back social or environmental causes, such as recycling plastics in the case of Hellmann’s.

Smith also accused Unilever of a lack of transparency over small acquisitions.

“Shouldn’t we have some idea how Unilever and its management have performed before they are allowed to do any more acquisitions? Unilever’s low return on capital might be a clue,” he wrote.

Reuters