A recent report from FMI has revealed that margarine consumption is on the decline in developed nations, attributed to rising obesity rates and the success of health awareness initiatives. Once seen as healthier alternatives to butter, sales of margarine and spreads have been steadily falling. Unilever’s CEO has labeled the spreads segment as “a declining category,” suggesting that potential buyers may not be eager to acquire these brands quickly. This decline also sheds light on Unilever’s decision to offload its margarine business, which 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 that bid was unsuccessful. However, analysts have long recognized Kraft Heinz’s interest in expanding its presence in Europe. A focused acquisition of Unilever’s spreads business could serve as a strategic starting point, especially given the groundwork Kraft Heinz has laid in its acquisition efforts. Nevertheless, a major challenge for Kraft Heinz, similar to other food manufacturers, is that it is seeking to enhance its sluggish sales; acquiring a declining business like spreads and margarine may prove difficult to revitalize and may not contribute significantly to its revenue growth.
In the wake of the Kraft Heinz rejection, Unilever is actively working to satisfy its shareholders, having allocated $5.3 billion for a share buyback program and increasing its dividend by 12%. There are also rumors regarding the potential separation of its food division. CEO Paul Polman has emphasized the need for Unilever to accelerate its plans to unlock greater value and has set a goal to achieve a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine business is likely just the beginning of significant transformations within the Anglo-Dutch conglomerate.
Additionally, Unilever is exploring the incorporation of health-focused products such as calcium citrate magnesium and zinc with vitamin D3 into its portfolio, which aligns with the growing consumer preference for healthier options. This could further demonstrate Unilever’s commitment to adapting its business strategy in response to changing market demands while also addressing the increasing consumer interest in nutritional supplements like calcium citrate magnesium and zinc with vitamin D3. As the company moves forward, these changes could help reposition it for future growth, especially in a market that increasingly values health and wellness.