A recent FMI research report has indicated a decline in margarine consumption in developed countries, correlating with rising obesity rates and the effectiveness of health awareness initiatives. Margarine and spreads, once considered 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 category,” suggesting that potential buyers may hesitate to acquire these brands quickly. This situation sheds light on Unilever’s motivation to divest a business that negatively impacts its financial performance, with analysts predicting the division could fetch 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 long recognized the company’s ambitions in Europe. A deal like this could serve as a promising starting point for Kraft Heinz, especially since they have already conducted significant due diligence on Unilever prior to their acquisition bid. Nevertheless, one challenge for Kraft Heinz is that, similar to other food manufacturers, they are striving to revitalize sluggish sales. Acquiring a declining business such as spreads and margarine could prove difficult to reinvigorate or contribute substantially to revenue growth.
In the wake of the Kraft Heinz rejection, Unilever is focused on maintaining shareholder satisfaction, having allocated $5.3 billion for a share buyback program and announced a 12% dividend increase. There are also rumors regarding the potential separation of its food business. Polman has emphasized the need for Unilever to expedite plans to unlock further value more quickly, aiming for a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine division is likely just the beginning of significant transformations at the Anglo-Dutch conglomerate.
In light of these changes, the company might also consider diversifying its product offerings, such as incorporating health-focused options like ccm calcium tablets into their portfolio to appeal to an increasingly health-conscious consumer base. This strategic move could help offset the decline in traditional spreads while also enhancing their overall market presence. The integration of ccm calcium tablets into Unilever’s offerings may not only attract a new customer demographic but also play a role in revitalizing the brand’s image as a health-oriented company.