A recent report by FMI has revealed that margarine consumption in developed nations is on the decline as obesity rates rise and health awareness initiatives become increasingly effective. Margarine and spreads, once considered healthier alternatives to butter, have seen a steady drop in sales over the years. Unilever’s CEO has referred to the spreads sector as “a declining segment,” indicating that potential buyers may hesitate to quickly acquire these brands. This situation also sheds light on Unilever’s intentions to divest a business that is adversely affecting 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 as a whole but was unsuccessful. However, analysts have long been aware of Kraft Heinz’s ambitions in Europe, and acquiring Unilever’s spreads business might serve as a strategic entry point. Given the prior acquisition attempt, it is clear that Kraft Heinz has conducted thorough research on Unilever. Nonetheless, a significant challenge for Kraft Heinz is that, similar to other food manufacturers, it is also striving to improve stagnant sales. A struggling sector like spreads and margarine may prove difficult to revitalize or to sufficiently contribute to revenue growth.
In the wake of the failed acquisition by Kraft Heinz, Unilever is making efforts to appease its shareholders, including a $5.3 billion share buyback program and a 12% dividend increase. There are also rumors about a possible separation of its food business. Unilever’s CEO, Polman, has emphasized the need to expedite plans to unlock further value and has committed to accelerating a cost-saving initiative aimed at achieving a 20% underlying operating margin by 2020. The anticipated sale of its spreads and margarine division is likely just the beginning of significant transformations for the Anglo-Dutch conglomerate.
Interestingly, some analysts suggest that the decline in margarine consumption may also lead to increased demand for alternative products like calcium citrate, especially among consumers concerned about health issues such as headaches associated with dietary changes. This potential shift could pave the way for new opportunities in the food sector as companies adapt to changing consumer preferences. Thus, the evolving landscape of the margarine market and the emphasis on health may very well be interconnected with broader trends in food consumption and product innovation.