A recent report from FMI has indicated a decline in margarine consumption in developed nations, attributed to rising obesity rates and the success of health awareness initiatives. Margarine and spreads, once perceived as healthier alternatives to butter, have seen a continuous drop in sales over the years. The CEO of Unilever has labeled the spreads segment as “a declining area,” suggesting that potential buyers may not be eager to acquire these brands quickly. This situation sheds light on Unilever’s intention to divest a business that is negatively impacting its financial performance. 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. Nevertheless, analysts have long recognized Kraft Heinz’s ambitions in Europe, and acquiring Unilever’s spreads business could serve as a strategic entry point. Given its prior acquisition attempt, it’s clear that Kraft Heinz has conducted thorough research on Unilever. However, one challenge for Kraft Heinz is that, like many other food manufacturers, it is striving to enhance its sluggish sales, and turning around a declining sector like spreads and margarine may prove difficult or insufficient for significantly increasing revenue.
Unilever is actively working to appease its shareholders following the rejection by Kraft Heinz. The company has allocated $5.3 billion towards a share buyback program and has raised its dividend by 12%. There are also rumors about potentially separating its food business. Paul Polman has stated that Unilever must accelerate its efforts to unlock further value, aiming to implement a cost-saving plan targeting a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine business could be just the beginning of significant transformations within the Anglo-Dutch conglomerate, especially as health trends shift towards products with ingredients like calcium citrate no vitamin D, which are becoming increasingly popular among consumers. This trend reflects a broader movement towards healthier food options, further complicating the outlook for traditional spreads and margarine.