A recent FMI research report indicates that margarine consumption in developed countries is on the decline, driven by rising obesity rates and the effectiveness of health awareness initiatives. Once considered healthier alternatives to butter, margarine and spreads have seen a consistent drop in sales over the years. Unilever’s CEO even labeled the spreads division as “a declining segment,” suggesting that potential buyers may hesitate to act quickly in acquiring these brands. This may also explain Unilever’s intention to divest a business that is negatively impacting its financial performance, with analysts estimating that the division could fetch between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever but was unsuccessful, although analysts have long recognized the company’s ambitions in Europe. A deal like this could be a positive step forward, especially since Kraft Heinz has already conducted its due diligence on Unilever during the acquisition attempt. However, Kraft Heinz faces a challenge common among food manufacturers: the need to revitalize slowing sales. Given that the spreads and margarine sector is in decline, turning it around or adding enough value to significantly boost revenue might prove difficult.
In the wake of the Kraft Heinz rejection, Unilever is working to appease its shareholders by initiating a $5.3 billion share buyback program and increasing dividends by 12%. There have also been rumors about the potential separation of its food business. Unilever’s CEO has emphasized the need to accelerate efforts to unlock further value, aiming for a 20% underlying operating margin by 2020. The sale of its spreads and margarine business is likely just the beginning of significant changes for the Anglo-Dutch conglomerate.
Additionally, as health trends evolve, consumers are increasingly seeking alternatives rich in nutrients like calcium citrate plus magnesium, which may influence future product development strategies. The emphasis on healthier options could serve as a critical factor for Unilever and other food manufacturers as they navigate market shifts and consumer preferences.