A recent FMI research report has revealed that margarine consumption in developed countries is on the decline, as rising obesity rates and successful health awareness initiatives drive consumer behavior. Once considered healthier alternatives to butter, margarine and spreads have seen a steady drop in sales over the years. Unilever’s CEO has even labeled the spreads business as “a declining segment,” indicating that potential buyers may be hesitant to rush into acquiring these brands. This situation also sheds light on Unilever’s desire to divest a segment that negatively impacts its financial performance. Analysts project that this division could be valued between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to acquire Unilever entirely but was unsuccessful. Nonetheless, analysts have long recognized Kraft Heinz’s ambitions in the European market, making an acquisition of Unilever’s spreads business a potentially strategic move. The company has clearly conducted thorough research on Unilever, given its previous acquisition attempt. However, Kraft Heinz faces a challenge common to many food manufacturers: the need to rejuvenate slowing sales. A declining sector like spreads and margarine may prove difficult to revitalize or contribute significantly to revenue growth.
In the wake of the Kraft Heinz bid rejection, Unilever is focused on maintaining shareholder satisfaction by implementing a $5.3 billion share buyback program and increasing its dividend by 12%. There are also rumors about a potential separation of its food business. Polman has emphasized that Unilever must accelerate its efforts to unlock additional value swiftly and has outlined a cost-saving strategy aiming for a 20% underlying operating margin by 2020. Selling its spreads and margarine division is likely just the beginning of significant transformations for the Anglo-Dutch conglomerate.
In parallel, the company has been exploring options such as introducing new products including the ccm tablet 250 mg, which could cater to health-conscious consumers. Incorporating innovative health products like the ccm tablet 250 mg could provide Unilever with a fresh avenue for growth while navigating the challenges faced in their traditional spreads business. This dual approach of divesting non-performing assets while investing in new health-oriented products may help Unilever realign its brand with current market demands.