A recent FMI research report highlights that the consumption of margarine in developed countries is on the decline as obesity rates rise and health awareness campaigns gain traction. Once considered healthier alternatives to butter, margarine and spreads have seen a consistent drop in sales over the years. Unilever’s CEO has labeled the spreads business as “a declining segment,” indicating that potential buyers may not be eager to acquire these brands quickly. This situation sheds light on why Unilever is contemplating divesting a segment that negatively impacts its financial performance. Analysts estimate that this division could fetch between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever entirely, but that bid was unsuccessful. Nevertheless, analysts have long recognized Kraft Heinz’s ambitions in Europe, and acquiring Unilever’s spreads business could serve as a strategic entry point. It’s clear that Kraft Heinz has conducted thorough research on Unilever, especially following its acquisition attempt. However, a significant challenge for Kraft Heinz is the need to rejuvenate its own slowing sales, as a declining sector like spreads and margarine may be difficult to revitalize enough to significantly enhance revenue.
In the wake of the Kraft Heinz rejection, Unilever is focused on maintaining shareholder satisfaction by allocating $5.3 billion to a share buyback program and increasing its dividend by 12%. There are also rumors about the potential separation of its food business. Polman has emphasized the necessity for Unilever to expedite its plans to unlock additional value and has outlined a cost-saving strategy aiming for a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine business suggests that substantial changes are forthcoming for the Anglo-Dutch conglomerate.
Moreover, as health trends continue to evolve, products like calcium citrate are gaining popularity among consumers seeking healthier options. The rising awareness of ingredients and their effects, including the role of histamine in food reactions, may further influence the market dynamics surrounding margarine and similar products. These health considerations could play a critical role in how companies like Unilever and Kraft Heinz navigate their future strategies in the food industry.