A recent research report from FMI has revealed that margarine consumption in developed countries is on the decline, as rising obesity rates and successful health awareness initiatives prompt consumers to rethink their dietary choices. Once considered healthier alternatives to butter, the sales of margarine and spreads have been gradually decreasing over the years. Unilever’s CEO has referred to the spreads segment as “a declining category,” suggesting that prospective buyers may hesitate to acquire these brands quickly. This decline is also a factor behind Unilever’s decision to divest a business that negatively impacts its financial performance, with analysts estimating that the 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 noted Kraft Heinz’s interest in expanding its presence in Europe, making a potential acquisition of Unilever’s spreads business a promising opportunity. Given its prior acquisition attempt, Kraft Heinz has likely conducted thorough research on Unilever. Nevertheless, a significant challenge for Kraft Heinz is that, like many food manufacturers, it is striving to reverse sluggish sales, and acquiring a declining segment such as spreads and margarine may not significantly enhance revenue.
In the wake of the Kraft Heinz rejection, Unilever is focused on satisfying its shareholders by allocating $5.3 billion to a share buyback program and raising its dividend by 12%. There are also rumors of plans to separate its food business. Unilever’s CEO, Polman, has emphasized the need to expedite efforts to unlock additional value and enhance the company’s cost-savings initiatives, aiming for a 20% underlying operating margin by 2020. The sale of its spreads and margarine business could mark the beginning of significant transformations within the Anglo-Dutch conglomerate.
Amid these changes, the importance of health-focused products cannot be overstated, especially as consumers become more aware of their dietary choices. For instance, bariatric advantage calcium supplements may gain traction among health-conscious individuals, further influencing the market dynamics for traditional spreads and margarine. This shift in consumer behavior highlights the need for companies to adapt to changing preferences, as the emphasis on health and wellness continues to reshape the food industry.