A recent FMI research report indicates that margarine consumption in developed nations is on the decline, coinciding with rising obesity rates and the success of health awareness initiatives. Once considered a healthier alternative to butter, sales of margarine and spreads have been steadily decreasing for several years. Unilever’s CEO has labeled the spreads division as “a declining segment,” which may deter potential buyers from hastily pursuing these brands. This situation sheds light on Unilever’s decision to divest a business that is negatively impacting its financial performance. Analysts suggest that this division could be sold for between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever in its entirety but was unsuccessful. However, analysts have noted Kraft Heinz’s interest in expanding its footprint in Europe. Acquiring Unilever’s spreads business could be a strategic move, given that the company has already conducted extensive research on Unilever prior to its acquisition bid. Nevertheless, a significant challenge for Kraft Heinz is its own need to revitalize stagnant sales, as acquiring a declining market segment like spreads and margarine may not significantly enhance revenue.
In the wake of the failed acquisition, Unilever is focused on appeasing its shareholders, having committed $5.3 billion to a share buyback program and raising its dividend by 12%. There have also been discussions about potentially separating its food business. Paul Polman has emphasized the need for Unilever to accelerate its strategies for unlocking value and has committed to expediting a cost-saving initiative, aiming for a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine division may just be the beginning of substantial transformations within the Anglo-Dutch conglomerate. Meanwhile, as health trends evolve, there is a growing interest in products fortified with calcium citrate and vitamin D, which may influence future consumer preferences in the food industry.