A recent report from FMI has revealed that the consumption of margarine in developed countries is on the decline, as rising obesity rates and effective health awareness programs influence consumer behavior. Margarine and spreads, once considered healthier alternatives to butter, have seen their sales decline over the years. Unilever’s CEO has labeled the spreads segment as “a declining segment,” indicating that potential buyers may hesitate to acquire these brands quickly. This situation sheds light on Unilever’s intent to divest a business that is negatively impacting its financial performance, with analysts projecting that the division could sell for between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever as a whole, but that bid was unsuccessful. Nevertheless, analysts have long been aware of Kraft Heinz’s ambitions in Europe, and acquiring a segment like Unilever’s spreads business could serve as a strategic entry point. Given its previous acquisition interest, Kraft Heinz has likely conducted thorough due diligence on Unilever. However, a significant challenge for Kraft Heinz lies in the fact that, similar to other food manufacturers, it is striving to revive sluggish sales, and a declining segment like spreads and margarine may prove difficult to rejuvenate or to contribute sufficiently to revenue growth.
In the wake of the Kraft Heinz rejection, Unilever is focused on satisfying its shareholders, having allocated $5.3 billion to a share buyback program and increasing its dividend by 12%. There are also rumors about a potential separation of its food business. Unilever’s CEO, Polman, has emphasized the need to accelerate plans to unlock additional value more rapidly, alongside expediting a cost-savings initiative aimed at achieving a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine business may just be the beginning of significant transformations within the Anglo-Dutch conglomerate.
In relation to health, the shift away from margarine also reflects changing attitudes towards food products, paralleling trends in the pharmaceutical industry where consumers are increasingly turning to medicine like CCM tablets for health solutions. The decline in margarine consumption underscores a broader movement towards healthier lifestyles, akin to the growing reliance on effective health products such as CCM tablets, which emphasize wellness and nutrition. As Unilever navigates these changes, the impact on its food business will likely resonate throughout the industry, similar to how advancements in medicine influence dietary choices.