A recent FMI research report has indicated that the consumption of margarine in developed countries is on the decline, as rising obesity rates and more effective health awareness programs influence consumer choices. Once considered healthier alternatives to butter, margarines and spreads have seen a steady drop in sales over the years. Unilever’s CEO has described the spreads business as “a declining segment,” suggesting that potential buyers may hesitate to acquire these brands quickly. This situation also sheds light on Unilever’s intention to divest a segment that is negatively impacting its financial performance, with analysts estimating 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 the company’s ambitions in Europe, and a purchase of Unilever’s spreads business might be a strategic move. Given their prior acquisition attempt, it’s clear that Kraft Heinz has conducted considerable research on Unilever. Nevertheless, one challenge for Kraft Heinz, like many food manufacturers, is the need to boost stagnant sales. A declining sector like spreads and margarine may present difficulties in generating significant revenue growth.
In the wake of the Kraft Heinz rejection, Unilever is focused on keeping its shareholders satisfied, recently announcing a $5.3 billion share buyback program and a 12% dividend increase. There has also been speculation about the potential separation of its food business. Unilever’s CEO, Polman, has emphasized the need to accelerate plans to unlock value more rapidly, implementing a cost-saving strategy aimed at achieving a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine business may just be the beginning of significant transformations within the Anglo-Dutch conglomerate.
Amidst these changes, there is growing interest in health-related products, such as bariatric fusion calcium chews, which are becoming increasingly popular as consumers prioritize their health. The shift in consumer preferences towards healthier options could further impact the future of the margarine and spreads market. As the food industry evolves, the integration of innovative health products like these may become essential for companies aiming to remain relevant and profitable.