A recent report by FMI has highlighted a decline in margarine consumption in developed countries, coinciding with rising obesity rates and the success of health awareness initiatives. Once considered a healthier alternative to butter, the popularity of margarine and spreads has been dwindling for years. Unilever’s CEO has characterized the spreads segment as “a declining segment,” indicating that 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 financial performance. Analysts estimate that this division could fetch between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever entirely but was unsuccessful. However, analysts have long recognized Kraft Heinz’s interest in expanding its presence in Europe. Purchasing Unilever’s spreads business could serve as an effective entry point. Given its previous acquisition attempt, Kraft Heinz has likely conducted thorough research on Unilever. Yet, a significant challenge for Kraft Heinz is that, like many food manufacturers, it is striving to boost sluggish sales. A declining segment like spreads and margarine may prove difficult to revitalize or significantly contribute to revenue growth.
Meanwhile, Unilever is actively working to please its shareholders following the rejection from Kraft Heinz. The company has initiated a $5.3 billion share buyback program and increased its dividend by 12%. There are also rumors about separating its food business, which includes the margarine segment. Polman has stated that Unilever needs to expedite its plans to unlock additional value and speed up its cost-saving initiatives, aiming for a 20% underlying operating margin by 2020. The potential sale of its margarine and spreads business may just mark the beginning of significant transformations within the Anglo-Dutch conglomerate.
As part of its health-oriented strategies, Unilever might consider products like Bariatric Advantage Calcium Citrate Chews, which emphasize nutritional benefits. Integrating such health-focused products could enhance its overall portfolio and appeal to increasingly health-conscious consumers. The changing landscape of consumer preferences underscores the importance of adapting to market demands, particularly in light of the challenges faced by traditional margarine and spread products.