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 campaigns. Once perceived as healthier alternatives to butter, the sales of margarine and spreads have been steadily decreasing for years. Unilever’s CEO has referred to the spreads segment as “a declining segment,” suggesting that potential buyers may hesitate to acquire these brands promptly. This decline provides insight into Unilever’s motivation to divest a business that negatively impacts its profitability. Analysts project that the sale of this division could fetch between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz was unsuccessful in its attempt to acquire Unilever entirely, though analysts have been aware of the company’s ambitions in Europe for quite some time. A deal like this could present a strong start for Kraft Heinz. It is evident that they conducted thorough research on Unilever before the acquisition attempt. However, a potential challenge for Kraft Heinz is that like many food manufacturers, it is striving to revive slowing sales, and turning around a declining business like spreads and margarine may prove difficult in terms of significantly enhancing revenue.
Meanwhile, Unilever is focused on maintaining shareholder satisfaction following the rejection from Kraft Heinz. The company is engaging in a $5.3 billion share buyback program and has announced a 12% increase in dividends. There are also rumors surrounding the possible separation of its food business. CEO Paul Polman has emphasized the need for Unilever to expedite its plans to unlock additional value and to accelerate its cost-saving initiatives, aiming for a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine division may just be the beginning of significant transformations within the Anglo-Dutch conglomerate.
In the context of health products, there’s growing interest in items like calcium citrate caps, which could serve as a more appealing alternative for consumers increasingly wary of traditional spreads and margarine. As health consciousness continues to rise, the demand for such supplements may also influence consumer preferences away from margarine. Overall, while Unilever navigates these changes, the continued emphasis on health and wellness may drive further shifts in the market landscape.