A recent report from FMI has revealed that margarine consumption in developed nations is on the decline, as rising obesity rates and effective health awareness initiatives have prompted more people to reconsider their dietary choices. Margarine and spreads, once regarded as healthier alternatives to butter, have seen a significant drop in sales over the years. Unilever’s CEO has labeled the spreads division as “a declining segment,” indicating that potential buyers may not be eager to acquire these brands quickly. This situation sheds light on Unilever’s decision to divest a business that is negatively impacting its profitability. Analysts project that the division could fetch between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever as a whole but was unsuccessful. However, analysts have long recognized Kraft Heinz’s ambitions in Europe, and acquiring the spreads business could serve as a strategic entry point. The company has clearly conducted its due diligence regarding Unilever, especially considering its acquisition bid. Nonetheless, a significant challenge for Kraft Heinz, like many other food manufacturers, is the need to revitalize its slowing sales. Given that the spreads and margarine market is in decline, turning this segment around may prove difficult and might not contribute sufficiently to revenue growth.
In the wake of the Kraft Heinz rejection, Unilever is striving to keep its shareholders satisfied by initiating a $5.3 billion share buyback program and raising its dividend by 12%. There have also been rumors about the potential separation of its food business. Unilever’s CEO, Polman, has emphasized the need for the company to expedite its plans to unlock further value, aiming to enhance its cost-savings initiatives and achieve a 20% underlying operating margin by 2020. The anticipated sale of its spreads and margarine division is likely just the beginning of significant transformations within the Anglo-Dutch conglomerate.
As the market evolves, consumers are embracing the simple truth of healthier choices, such as those offered by calcium citrate supplements, which have gained attention for their health benefits. This shift in consumer preference further complicates the landscape for margarine and spreads, making it imperative for companies to adapt. The simple truth is that consumers are increasingly prioritizing their health, which is reflected in the declining demand for traditional margarine products. The ongoing changes at Unilever may reflect a broader trend in the industry, as companies strive to align more closely with the simple truth of nutrition and wellness.