Volume growth masks a revenue decline

The Q1 trading update, published on 30 April, showed positive underlying sales growth across all four of Unilever's reporting categories, according to the company's filing. Home care led with six per cent underlying sales growth; beauty and wellbeing added 3.6 per cent. Overall volume growth of 2.9 per cent exceeded consensus forecasts.

The reported revenue picture was less flattering. Group turnover fell three per cent to €12.6bn. Revenue declined in beauty and wellbeing (down five per cent), home care (down three per cent) and food (down six per cent). Only personal care grew, edging up 0.6 per cent to €3.3bn, according to the company's quarterly statement.

Unilever's share price rose 0.7 per cent on the morning of the results to 4,247p, but the stock remains down roughly 12 per cent year-to-date, underperforming the FTSE 100 since chief executive Fernando Fernandez took the helm and began accelerating the group's portfolio reshaping.

Duncan Ferris, an analyst at Freetrade, noted the tension between the strategy's direction and investor sentiment.

"The once highly diversified Unilever might have upset some by focusing on the bathroom cupboard rather than the kitchen pantry. But volume growth, along with buybacks and a dividend boost, could take the edge off investor anxiety."

The real price of spinning off food

The McCormick merger, announced in March 2026, combined Unilever's food brands, including Marmite and Hellmann's, with the US spice maker to create a $60bn food entity. Completion is expected by mid-2027 at the latest, according to the company.

Unilever disclosed in its Q1 update that the separation will leave behind €400m to €500m of stranded costs: overheads currently shared across the group that will no longer be spread over the food division's revenue base once it departs. The company said it expects to offset those costs with savings programmes running from 2027 to 2029, but that the savings effort itself will incur one-off restructuring charges of €500m over the same period.

In the company's own words: "We expect €400-500 million of stranded costs post the separation, which will be offset with savings over 2027 to 2029, incurring one-off restructuring costs of €500 million over that period."

The combined cost tail, potentially reaching €1bn, raises questions about the net financial benefit of the deal over the medium term. Stranded costs are a well-documented hazard of large spin-offs and demergers; they arise when shared services, IT platforms, procurement contracts and corporate functions cannot be unwound at the same pace as the legal separation. For a group already navigating falling reported revenue, absorbing those costs while simultaneously funding restructuring will test management's execution.

The timeline matters. A three-year savings window stretching to 2029 means Unilever's remaining business, increasingly concentrated in beauty, personal care and home care, will carry the drag well after the McCormick transaction closes. Whether the savings materialise on schedule depends on how quickly shared infrastructure can be re-platformed or eliminated, a process that rarely runs to plan in organisations of Unilever's scale.

The wider food portfolio unwind

Unilever's food retreat is not happening in isolation. KKR is separately exploring a $10bn sale of Flora Food Group, the spreads business it acquired from Unilever in 2017 for $7.9bn, according to the Financial Times. Flora Food Group, formerly known as Upfield, holds brands including Becel, Country Crock and I Can't Believe It's Not Butter.

That KKR is now looking to exit at a significant premium underlines how the valuations of food assets have shifted since Unilever began divesting. It also highlights the degree to which Unilever's legacy food portfolio has been dispersed across multiple owners, each with different capital structures and strategic priorities.

Governance gap: why shareholders are pushing back

The McCormick deal was structured so that Unilever shareholders were not given a vote, a decision that has triggered open investor dissent, as first reported by City AM. Under the deal's legal architecture, the transaction did not cross the thresholds that would have required a shareholder ballot under UK listing rules, but several large holders have argued that a deal of this magnitude warranted one regardless.

Jack Martin, portfolio manager at Oberon and a Unilever investor, told City AM: "It's not great if you're a big fund and you own five per cent of the company, you're the owner, you should have a say, that's not ideal."

Other shareholders described the megamerger as feeling "rushed", according to City AM's reporting. The frustration is not purely procedural. Investors who bought into Unilever as a diversified consumer goods group are watching a fundamental change in the company's earnings mix without the opportunity to formally approve or reject it.

The episode sits within a broader governance debate at UK-listed companies. Boards have wide latitude to pursue transactions that fall below the Class 1 threshold without a shareholder vote. When the transaction is large enough to reshape the group's strategic identity, that latitude can feel like a loophole rather than a feature. For other boards weighing similarly significant deals, the Unilever backlash is a cautionary signal: legal compliance and shareholder legitimacy are not the same thing.

Fernandez, for his part, has framed the strategy in confident terms. He said on the day of the results: "We continue to move at speed to build a simpler, sharper Unilever with a structurally higher growth profile and a brand portfolio fit for the future." He added: "Despite heightened macroeconomic uncertainty, we remain confident of delivering on our guidance for the year ahead."

What operators can take from Unilever's portfolio reset

Unilever's experience offers several practical lessons for operators and boards at UK businesses considering their own portfolio simplification.

Stranded costs are structural, not incidental. Shared services, procurement synergies and IT platforms do not disappear when a division is sold or merged. Quantifying the cost tail before announcing a deal, as Unilever has now done publicly, is essential to setting realistic expectations with investors and internal teams.

Restructuring charges compound the drag. The €500m Unilever expects to spend eliminating stranded costs is a second, separate hit. Boards should model the full cost of separation, not just the stranded overhead, when assessing whether a transaction genuinely creates value on a net basis.

Savings timelines deserve scepticism. A three-year window to offset stranded costs assumes disciplined execution across procurement renegotiation, headcount reduction and systems migration. Slippage in any one area pushes the breakeven point further out.

Governance perception matters as much as compliance. Unilever's board was within its legal rights to proceed without a vote. The reputational cost of doing so, measured in investor trust and share-price underperformance, may prove harder to recoup than the stranded overheads themselves.

For any business contemplating a significant divestment or merger, the Unilever case is a reminder that the announcement is the easy part. The years of operational unwinding that follow determine whether the strategy actually delivers.