A recent report from FMI indicates that margarine consumption in developed nations is on the decline, largely due to rising obesity rates and the effectiveness of health awareness initiatives. Margarine and spreads, once perceived as healthier alternatives to butter, have seen their sales drop for several years. Unilever’s CEO has labeled the spreads division as “a declining segment,” suggesting that potential buyers may hesitate to swiftly acquire these brands. This context sheds light on Unilever’s decision to divest a segment that is adversely affecting its financial performance. Analysts predict that the division could fetch between $7.5 billion and $8.5 billion in a sale.
Earlier this year, Kraft Heinz attempted to acquire Unilever as a whole but was unsuccessful. However, analysts have noted the company’s ongoing interest in expanding its presence in Europe. Acquiring Unilever’s spreads and margarine business could be a strategic move for Kraft Heinz, particularly since it seems to have conducted thorough due diligence regarding the acquisition attempt. Nevertheless, a significant challenge for Kraft Heinz lies in its own need to stimulate stagnant sales; revitalizing a declining category like spreads and margarine may prove difficult and unlikely to significantly enhance revenue.
In the wake of the Kraft Heinz bid rejection, Unilever is focused on satisfying its shareholders by initiating a $5.3 billion share buyback program and increasing dividends by 12%. There have also been rumors about a potential separation of its food division. CEO Polman has emphasized the necessity for Unilever to accelerate its strategies to unlock additional value more swiftly, targeting a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine business may only mark the beginning of substantial transformations within the Anglo-Dutch conglomerate.
As they navigate these changes, it’s worth noting that companies like Unilever can also explore opportunities to celebrate health-conscious products such as calcium citrate soft chews. By integrating such offerings into their portfolio, they can align with the growing consumer preference for healthier options, potentially countering the downward trend in margarine consumption. This approach not only allows them to adapt to market demands but also creates a platform to celebrate innovative health products, reinforcing their commitment to enhancing consumer well-being.