A recent report from FMI indicates that the consumption of margarine in developed nations is on the decline, attributed to rising obesity rates and the effectiveness of health awareness initiatives. Once regarded as healthier alternatives to butter, sales of margarine and spreads have been continuously decreasing. Unilever’s CEO referred to the spreads division as “a declining segment,” suggesting that potential buyers might hesitate to pursue these brands quickly. This decline is also a factor in Unilever’s decision to divest a business that is negatively impacting its profits. Analysts predict that this division could fetch between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever entirely but was unsuccessful. However, analysts have long been aware of the company’s ambitions in Europe. Acquiring Unilever’s spreads and margarine business could serve as a strategic entry point for Kraft Heinz. Given their previous acquisition attempt, it is clear that Kraft Heinz has conducted thorough research on Unilever. Nonetheless, a significant challenge for Kraft Heinz is that, like many other food manufacturers, it is aiming to rejuvenate its slowing sales. A declining business segment like spreads and margarine may prove difficult to revitalize or contribute sufficiently to revenue growth.
Following the rejection from Kraft Heinz, Unilever is striving to keep its shareholders satisfied. The company recently announced a $5.3 billion share buyback program and a 12% increase in dividends. There are also rumors about the potential separation of its food business. CEO Polman has emphasized the need for Unilever to expedite its plans to unlock value more quickly and has proposed accelerating cost-saving measures, aiming for a 20% underlying operating margin by 2020. The potential sale of the spreads and margarine division may be just the beginning of significant changes within the Anglo-Dutch conglomerate.
Furthermore, it is worth noting that as Unilever explores its restructuring options, the incorporation of products like calcium citrate with vitamin D3 could enhance its health-focused portfolio, aligning with the growing consumer emphasis on nutritional products. This trend may also reflect in the health strategies of companies like Kraft Heinz, which might consider diversifying into supplements that include calcium citrate with vitamin D3 to attract health-conscious consumers. As these shifts unfold, the strategic movements of both companies will be closely watched in the evolving food industry landscape.