The EconomistMarch 28th 2020 Business 61O
n march 13 thAlan Jope, boss of Unilever, a consumer-goods
conglomerate that makes everything from Dove soap to Knorr
soup, ordered the firm’s 60,000 office workers in all countries bar
China to work from home. The 56-year-old Scot took a train to Ed-
inburgh where he joined his family. Sitting in his study, he recent-
ly spoke to Schumpeter via an online video-chat that he uses to run
a business empire. In a world gone awry, it all felt rather normal.
Mr Jope, in his habitual casual garb, looked relaxed. Despite the
gravity of the covid-19 pandemic, remote working is “dead easy”, he
says; without commuting, he has more time to liaise with under-
lings around the world.
That is good news, and not just for Unilever. Since January the
company has been on the front line of the covid-19 outbreak. As
one of the world’s biggest consumer-goods firms, it sells food, hy-
giene products and other more or less essential staples to 2.5bn
customers in 190 countries. Without continued availability of its
wares the pandemic’s toll would almost certainly be even greater.
Listening to Mr Jope it becomes clear how many rules of busi-
ness the pandemic has shattered. The impact on production, con-
sumption and generation of profit is even greater than on office
work. The nature of the top job, which he has held since January
2019, has changed, too. In the past the hallmark of a good boss was
a strategic mind. The covid era is all about the here and now.
Like many a boss, Mr Jope thinks in categories. For his firm, the
pandemic has come in three waves. It began with the lockdown in
China. The stoppages then spread to northern Italy, the rest of Eu-
rope and America. Now they have reached poor places such as the
Philippines, India and Africa. He has four guiding principles: look
after people; look after supply; look after demand; look after cash.
First, people. Unilever is trying to safeguard the physical and fi-
nancial well-being of its 155,000-strong workforce. Besides send-
ing office staff home, factories are operating in “Fort Knox mode”
to prevent the spread of infection, he says. Sales teams are ordered
to contact customers virtually. Unilever will maintain pay levels
for up to three months for all who work for it either directly or, like
cleaning and catering staff, through contractors.
Second, production. For Unilever, China and Italy have been
laboratories. They offered valuable insights into dealing with lock-downs and “deep cleaning” of factories. When the authorities
locked down Lombardy, they at first banned lorry transit. After
companies warned of the risk this posed for the supply of food and
basic necessities, the order was relaxed. Countries are realising
how important it is to keep products moving across borders and
within them, Mr Jope says. The firm is not too exposed to cross-
border snags. Almost all its products are made from ingredients
sourced in the country of production. It scarcely uses air freight,
and seaports mostly remain open. Mr Jope says he has so far seen
limited disruption at the base of the supply chain, among farmers
or packaging firms (but concedes this may change if lockdowns
last for months). The biggest bottleneck in many places, he says, is
a shortage of lorry drivers, who are “critical”.
As for consumers, his third priority, they have been forced to
shop less in all. Moreover, the sheer scale of panic buying in some
places in recent weeks has led Unilever to turn monthly sales fore-
casts into weekly ones. Consumption patterns are not uniform.
America and Europe have witnessed shelves stripped, mostly in
big supermarkets. In developing countries people flock to neigh-
bourhood shops. Demand is shifting online just about every-
where, but internet shopping is “totally overwhelmed”.
Cash is the fourth concern. Unilever is in decent shape. Its debt
is moderate, at less than two times ebitda. It notched up €52bn
($58bn) in sales last year. Most important at a time of a corporate
cash crunch, it had €6.1bn in free cashflow. Like other consumer-
goods giants Unilever bolstered it over the past decade by being ro-
bust with suppliers. It is not alone. The payables (roughly, what is
owed to suppliers) of eight big consumer-goods multinationals,
including Unilever, has risen from a median of 9% of sales in the
2000s to 16% last year, in part thanks to longer payment periods.
Now Mr Jope is giving some of it back. On March 24th the firm
said it would extend €500m of cashflow relief to suppliers and cus-
tomers, by speeding up payment to small and medium-sized ven-
dors, and offering credit to small retailers that rely on Unilever.
The chief executive says that if many other big companies pay
their suppliers more quickly, it would considerably ease the finan-
cial strains felt by the small fry. Unilever’s relief up and down its
supply chain presents a big shift in a business model of wringing
efficiencies through ultra-lean production and distribution. But it
has little choice. Although sales of some products may get a boost
from panic buying, overall Unilever will not benefit as self-isolat-
ing consumers shop less, he thinks.
Apart from changing Unilever’s business, covid-19 is also re-
shaping its boss’s role. For decades, ceos have fancied themselves
as grand strategists, like generals who believe strategy is to war
what plot is to the play. Reputations were burnished with bold,
cunning moves, such as mergers and acquisitions or spin-offs.
The running of day-to-day operations, including supply chains
and staff, were about as glamorous as stage management.Strategic retreat
No longer. Mr Jope says that right now strategy is not the main pri-
ority. His “operational brains”—the hr, supply-chain and opera-
tions chiefs—are more important than ever. His country heads are
crucial to running businesses on the ground, including negotia-
tions with panicky governments. Internal communication is criti-
cal. One day strategic opportunities will resurface. But right now is
not the time for distractions. At least most of them: before saying
goodbye he lets slip, slightly bashfully, that his next appointment
is a virtual party organised by some of his younger employees. 7Schumpeter A dispatch from the home front
A locked-down world, as seen from the study of Unilever’s boss