Consumer goods company Unilever has announced that CEO Hein Schumacher will be stepping down after less than two years at the helm – an announcement that reportedly caught investors off guard.

His successor, Fernando Fernandez, the company’s current chief financial officer, has been tasked with steering the company through its next phase of transformation.

The sudden leadership transition sent ripples through the market, with Unilever’s shares dipping by 3.4% on the day of the announcement.

Schumacher, who took over as CEO in July 2023, was initially welcomed with enthusiasm, especially by external investors eager for fresh leadership.

However, his tenure was short-lived despite implementing a strategic reset aimed at revitalising Unilever’s performance.

While the company remained tight-lipped about the reasons for the change, sources suggest that internal management style differences may have played a role.

The decision was made following a board meeting on Monday, where Unilever’s leadership determined that Fernandez, a 30-year company veteran, was best positioned to drive execution at a critical juncture.

The move signals a shift in priorities – from strategy formulation to hands-on delivery.

Also Read: Unilever appoints Hein Schumacher as CEO

A tough climate for consumer goods

Unilever’s leadership transition comes at a time when the broader consumer goods sector is grappling with economic headwinds. The industry has been buffeted by supply chain disruptions, soaring commodity prices, and an energy crisis exacerbated by geopolitical tensions.

Consumer spending habits have also shifted, with many opting for budget-friendly alternatives. This has put pressure on premium brands such as Unilever.

The company’s recent financial performance has also been under scrutiny, with its latest full-year earnings falling short of expectations and echoing broader sectoral struggles.

Rival Nestlé faced a similar leadership shakeup last year when CEO Mark Schneider was shown the door after a series of disappointing sales figures.

Schumacher had rolled out a comprehensive cost-cutting programme, including the separation of Unilever’s ice cream division and significant workforce reductions.

While the moves were seen as necessary for long-term sustainability, they may not have delivered immediate gains substantial enough to appease stakeholders.

Investor reactions range from shock to scepticism

Market analysts and investors were said to be caught off guard by Schumacher’s exit, particularly given Unilever’s relative outperformance compared to peers.

RBC Capital analyst James Edwardes Jones summed up the prevailing sentiment, stating: “We are gobsmacked at the news that Unilever’s very highly regarded CEO Hein Schumacher is to step down after a very successful 18 months in charge.”

Activist investor Nelson Peltz, who holds a seat on Unilever’s board, had previously backed Schumacher’s strategic direction. However, his Trian Fund remained tight-lipped following the leadership change.

Some investors have questioned whether Unilever’s board underestimated the benefits of an outsider’s perspective.

“It has to be something to do with his style of managing the company. We felt that the job needed an outsider, but maybe this was not the view of a meaningful proportion of Unilever’s employees,” Jones said.

Fernandez and a renewed focus on execution

Chairman Ian Meakins defended the board’s decision, highlighting Fernandez’s “decisive and results-oriented approach.”

Fernandez’s track record within Unilever, spanning multiple leadership roles, has positioned him as a steady hand familiar with both operational intricacies and investor expectations.

Before stepping into the CFO role in early 2024, Fernandez led Unilever’s Beauty & Wellbeing division, one of its fastest-growing segments. He also served as President of Latin America, CEO of Unilever Brazil, and CEO of Unilever Philippines.

While some investors remain cautious, others see promise in Fernandez’s appointment.

“We were surprised by the announcement but have a positive view of the CFO … He is a 30-year veteran of the business who ran the Beauty and Wellbeing division very well,” said Harsharan Mann of Aviva Investors in a report by Reuters.

Also Read: Unilever to add activist investor Nelson Peltz to Board

Schumacher’s exit terms and leadership legacy

Schumacher will remain in his role until 1 March this year and officially leave Unilever by the end of May. He will be classified as a “good leaver,” continuing to receive his fixed salary until his departure, along with an undisclosed severance payment.

Reflecting on his tenure, Schumacher stated: “We have made real progress and I am proud of what we have achieved in a short period of time.”

His leadership saw the introduction of the Growth Action Plan or GAP, which will reportedly remain central to Unilever’s long-term vision.

Despite the abrupt leadership overhaul, the board reaffirmed its commitment to Schumacher’s roadmap, with the plan of “further accelerating” its execution under Fernandez.

What’s next for Unilever?

While Fernandez has received the board’s vote of confidence, he inherits a business at a crossroads. Unilever’s core challenge is to demonstrate cost efficiency with brand strength in an increasingly price-sensitive consumer landscape.

His immediate focus will be on delivering “best-in-class results,” as Meakins put it.

Fernandez has outlined his vision by emphasising portfolio optimisation, brand superiority, and delivering tangible value to shareholders.

“Our focus will be on building a future-fit portfolio with an attractive growth footprint and delivering unmatched functional and perceivable superiority across our top 30 power brands,” he said.

Investors will be watching closely as Fernandez hits the ground running.