Unilever’s Turnaround Strategy and Operational Restructuring: A Path to Cost Efficiency and Shareholder Value

Unilever’s operational restructuring, initiated under its Growth Action Plan and 2024 productivity programme, has emerged as a pivotal catalyst for cost efficiency and long-term shareholder value creation. By mid-2025, the company had already incurred €850 million in restructuring costs—1.4% of Group turnover—as part of a broader strategy to simplify operations and achieve €800 million in savings by 2025 [1]. These measures, coupled with strategic divestitures and geographic realignment, have driven a 280 basis point expansion in gross margin to 45.0% in 2024, the highest level in a decade [1]. This margin improvement, fueled by volume leverage, mix optimization, and productivity gains in material and logistics costs, has directly supported increased brand investment and a 14.7% rise in underlying earnings per share (EPS) to €2.98 [2].

Strategic Divestitures and Cost-Cutting: A Dual-Pronged Approach

A cornerstone of Unilever’s restructuring is the demerger of its €8.6 billion ice cream business into the standalone entity The Magnum Ice Cream Company (TMICC), slated for completion by mid-November 2025 [1]. This move isolates a business with distinct operational challenges—seasonality and complex logistics—from Unilever’s core segments, enabling both entities to optimize performance independently. The productivity programme, meanwhile, has accelerated cost-cutting through the reduction of 7,500 office-based roles and process standardization. By Q1 2025, Unilever had already reduced 6,000 full-time equivalents (FTEs), achieving €650 million in savings ahead of schedule [3]. These actions are projected to deliver a further €550 million in savings by year-end, with underlying operating margins expected to reach at least 18.5% in the second half of 2025 [1].

Financial Performance and Margin Resilience

The restructuring’s impact on profitability is evident in Unilever’s first-half 2025 results. Underlying sales grew 3.4%, driven by 1.9% from price increases and 1.5% from volume gains [1]. While operating profit dipped 10.6% year-on-year to €5.3 billion, this was offset by a robust gross margin of 45.7% and a 19.3% underlying operating margin [1]. Analysts attribute this resilience to the productivity programme’s success in reducing costs while maintaining growth in high-potential segments like Personal Care (4.8% growth) and Beauty & Wellbeing (3.7% growth) [1].

Long-Term Value Creation and Strategic Priorities

Unilever’s focus on core segments—Beauty & Wellbeing, Personal Care, Home Care, and Nutrition—has been reinforced by the divestiture of non-core assets such as The Vegetarian Butcher and its Russian subsidiary [3]. This portfolio optimization, combined with disproportionate investment in premium segments and digital commerce, positions the company to capitalize on emerging market growth. For instance, India, Indonesia, and China are expected to see gradual improvement in the second half of 2025, driven by localized innovations and enhanced execution [1].

The separation of TMICC and the productivity programme are also critical for maintaining a disciplined capital structure. By mid-2025, Unilever had already achieved a 170 basis point increase in underlying operating margin to 18.4% and a 190 basis point improvement in return on invested capital (ROIC) to 18.1% [1][2]. These metrics underscore the company’s ability to balance cost efficiency with reinvestment in high-growth areas, ensuring sustainable value creation for shareholders.

Conclusion: A Model for Sustainable Restructuring

Unilever’s operational restructuring exemplifies a disciplined approach to cost efficiency and strategic realignment. By prioritizing core businesses, streamlining operations, and leveraging productivity gains, the company has not only stabilized its margins but also positioned itself for long-term growth. As the ice cream demerger nears completion and cost-cutting initiatives reach full scale, investors can anticipate further margin expansion and robust shareholder returns. For a corporation navigating a shifting consumer landscape, Unilever’s strategy offers a blueprint for resilience and value creation in an era of economic uncertainty.

**Source:[1] Unilever's Strategic Reorganization and Market Resilience [https://www.ainvest.com/news/unilever-strategic-reorganization-market-resilience-pathway-sustainable-growth-shifting-consumer-landscape-2507/][2] Financial Analysis of Unilever Plc: A Guide for Potential ... [https://www.locusassignments.com/blog/financial-analysis-unilever-plc-investor-guide][3] Resilient performance, full year outlook reconfirmed [https://www.unilever.com/news/press-and-media/press-releases/2025/resilient-performance-full-year-outlook-reconfirmed/]