A recent FMI research report indicates that margarine consumption in developed countries is on the decline, driven by rising obesity rates and the effectiveness of health awareness programs. Once regarded as healthier alternatives to butter, margarine and spreads have experienced a continuous drop in sales. Unilever’s CEO has referred to the spreads business as “a declining segment,” suggesting that potential buyers may hesitate to pursue these brands quickly. This situation sheds light on Unilever’s intention to divest a business that negatively impacts 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 entirely but was unsuccessful. However, analysts have long recognized the company’s ambitions in Europe. Acquiring the spreads and margarine segment could be a strategic move for Kraft Heinz, especially given its prior interest in Unilever. However, a significant challenge for Kraft Heinz is its own need to rejuvenate stagnating sales, as a declining segment like spreads and margarine may prove difficult to revitalize or to significantly enhance revenue.
In response to the rejection from Kraft Heinz, Unilever is actively working to appease shareholders by implementing a $5.3 billion share buyback program and increasing its dividend by 12%. There are also rumors regarding the potential separation of its food business. Polman has emphasized the necessity for Unilever to expedite its strategies to unlock further value and has committed to accelerating a cost-savings initiative, aiming for a 20% underlying operating margin by 2020. The potential divestiture of its spreads and margarine business could signal the beginning of significant transformations at the Anglo-Dutch conglomerate.
Interestingly, as part of its health-focused initiatives, Unilever has been exploring ingredients like calcium citrate, which is gaining attention for its potential benefits. The incorporation of calcium citrate into its products could be a way to align with health trends, especially as consumer preferences shift. Thus, the future direction of Unilever may not only involve selling off underperforming segments but also innovating with healthier ingredients such as calcium citrate to attract a more health-conscious consumer base.