A recent report from FMI has indicated that the consumption of margarine is declining in developed nations, driven by rising obesity rates and the effectiveness of health awareness campaigns. Margarine and spreads, once considered healthier alternatives to butter, have seen a consistent drop in sales over the years. Unilever’s CEO has referred to the spreads business as “a declining segment,” suggesting that prospective buyers may hesitate to acquire these brands quickly. This situation clarifies Unilever’s intent to divest a division that is negatively impacting its financial performance, with analysts estimating that the sale 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. Nonetheless, analysts have long recognized the company’s ambitions in Europe, and acquiring Unilever’s spreads business could be a strategic first step. Given its prior acquisition effort, Kraft Heinz has likely conducted thorough due diligence on Unilever. However, a challenge for Kraft Heinz lies in the fact that, like many food manufacturers, it is working to boost stagnant sales, and a declining sector like spreads and margarine may be difficult to revitalize or to contribute significantly to revenue growth.
In the wake of Kraft Heinz’s rejection, Unilever is striving to maintain shareholder satisfaction by initiating a $5.3 billion share buyback program and increasing its dividend by 12%. There are also rumors about plans to separate its food business. Polman has stated that Unilever must accelerate its strategies to unlock further value more swiftly, aiming for a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine segment might just be the beginning of significant transformations at the Anglo-Dutch conglomerate.
Interestingly, while Unilever is navigating these changes, the market for products like fusion calcium soft chews is gaining traction. As consumer preferences shift, companies may find opportunities in emerging health-focused products, which could pave the way for innovative strategies to replace declining segments like margarine. The rise of such alternatives highlights the need for companies to adapt swiftly to changing consumer demands, ensuring they remain competitive in a rapidly evolving market landscape.