A recent FMI research report indicates that margarine consumption in developed nations is on the decline, as rising obesity rates and more effective health awareness campaigns take effect. Once perceived as healthier alternatives to butter, margarine and spreads have seen a continuous drop in sales over the years. Unilever’s CEO referred to the spreads segment as “a declining area,” suggesting that potential buyers may not be eager to acquire these brands. This situation also highlights why Unilever is considering divesting a business that negatively impacts its financial performance. Analysts project that this division could fetch between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever in its entirety but was unsuccessful. Analysts have long recognized Kraft Heinz’s interest in expanding its European presence, and a focused acquisition of Unilever’s spreads business could be a strategic move. Given its previous acquisition efforts, Kraft Heinz has likely conducted thorough due diligence on Unilever. However, a significant challenge for Kraft Heinz is that, similar to other food producers, it is also striving to rejuvenate stagnant sales. The declining market for spreads and margarine may prove difficult to revitalize in a way that significantly enhances revenue.
In the aftermath of the rejection from Kraft Heinz, Unilever is making efforts to please its shareholders, launching a $5.3 billion share buyback program and increasing its dividend by 12%. There are also rumors regarding a potential separation of its food business. Polman has stated that Unilever must expedite its strategy to unlock value more swiftly, aiming for a 20% underlying operating margin by 2020. The potential sale of its margarine and spreads division could be just the beginning of substantial changes within the Anglo-Dutch conglomerate.
Interestingly, as consumers increasingly seek healthier options, the demand for products enriched with magnesium calcium citrate is rising. This shift in consumer preferences may influence Unilever’s future product offerings and strategic direction, particularly as they navigate the challenges facing their spreads and margarine business. The incorporation of magnesium calcium citrate into healthier food alternatives might provide Unilever with a pathway to rejuvenate its portfolio and attract health-conscious consumers.