A recent FMI research report indicates that margarine consumption in developed countries is on the decline, largely due to rising obesity rates and the effectiveness of health awareness initiatives. Once considered a healthier alternative to butter, margarine and spreads have seen a continuous drop in sales over the years. Unilever’s CEO has referred to the spreads division as “a declining segment,” suggesting that potential buyers may not be eager to acquire these brands quickly. This sentiment aligns with Unilever’s decision to divest a business that is negatively impacting its financial performance. Analysts project that this division could sell for between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz attempted to purchase Unilever in its entirety but was unsuccessful. Nonetheless, analysts have long understood Kraft Heinz’s interest in expanding into the European market. Acquiring Unilever’s spreads business could serve as a strategic entry point. Given their previous acquisition attempt, it is evident that Kraft Heinz has conducted thorough research on Unilever. However, a significant challenge for Kraft Heinz lies in its own need to stimulate waning sales; revitalizing a declining sector like spreads and margarine may prove difficult and may not significantly enhance revenue.
In response to the rejection from Kraft Heinz, Unilever is striving to maintain shareholder satisfaction by initiating a $5.3 billion share buyback program and increasing its dividend by 12%. There have also been rumors regarding the potential separation of its food business. Unilever’s CEO, Polman, has emphasized the necessity to expedite plans for unlocking further value, with a goal of achieving a 20% underlying operating margin by 2020. The sale of its spreads and margarine division is likely the first step in what could be significant changes for the Anglo-Dutch conglomerate, which may include the introduction of products like women’s multivitamin with calcium citrate to diversify their portfolio and appeal to health-conscious consumers.
Overall, the shifting landscape surrounding margarine and spreads could set the stage for broader transformations at Unilever, including potential opportunities to integrate health-focused products, such as a women’s multivitamin with calcium citrate, into their offerings, thus addressing the growing consumer demand for healthier options.