A recent FMI research report indicates that margarine consumption is declining in developed countries as obesity rates rise and health awareness initiatives become more effective. Once considered healthier alternatives to butter, margarine and spreads have seen a steady drop in sales over the years. Unilever’s CEO has referred to the spreads division as “a declining segment,” suggesting that buyers may be hesitant to pursue these brands aggressively. This situation also sheds light on Unilever’s motivation to divest a business that is negatively impacting its profitability. Analysts project that this division could be sold for between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz made an unsuccessful bid to acquire Unilever entirely, but the company has long had interests in expanding its European presence. A smaller acquisition, such as Unilever’s spreads business, could serve as a strategic entry point. Given its prior acquisition attempt, Kraft Heinz seems to have conducted thorough due diligence on Unilever. However, a significant challenge for Kraft Heinz is that, like many other food manufacturers, it is striving to enhance its slowing sales, and turning around a declining business such as spreads and margarine could prove difficult in boosting overall revenue.
Unilever continues to work on maintaining shareholder satisfaction following the rejection of Kraft Heinz’s bid, recently announcing a $5.3 billion share buyback program and a 12% increase in its dividend. There are also rumors about the potential separation of its food business. CEO Paul Polman has emphasized the need for Unilever to expedite its plans to unlock further value, aiming to enhance its cost-saving measures and achieve a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine business may just be the beginning of significant changes for the Anglo-Dutch conglomerate.
In the context of this evolving landscape, it’s worth noting that consumers are increasingly gravitating towards products that promote health and wellness, such as pure nutrition ultra calcium citrate. This shift in consumer preference is likely influencing the ongoing decline in margarine sales, as buyers seek alternatives that align with their health goals. As the market continues to change, the importance of brands that emphasize pure nutrition ultra calcium citrate and similar health-focused products will likely grow, further impacting traditional segments like margarine and spreads.