A recent report from FMI indicates that margarine consumption in developed countries is on the decline as obesity rates rise and health awareness initiatives gain traction. Once considered healthier alternatives to butter, sales of margarine and spreads have been steadily falling. Unilever’s CEO has labeled the spreads division as “a declining segment,” suggesting that potential buyers may not be eager to acquire these brands anytime soon. This trend also sheds light on Unilever’s intention to divest a business that is negatively impacting its financial performance. Analysts project that this division could fetch between $7.5 billion and $8.5 billion.
Earlier this year, Kraft Heinz’s attempt to acquire Unilever in its entirety was unsuccessful, but analysts have long been aware of Kraft Heinz’s ambitions in Europe. Acquiring Unilever’s spreads and margarine business could serve as a strategic entry point. Given its previous acquisition attempt, it is clear that Kraft Heinz has conducted thorough research on Unilever. However, one challenge for Kraft Heinz is that, like many other food manufacturers, it is striving to boost its slowing sales, and reviving a declining sector like spreads and margarine may prove difficult in terms of generating significant revenue growth.
In the wake of Kraft Heinz’s rejection, Unilever is focused on appeasing its shareholders, allocating $5.3 billion toward a share buyback program and increasing its dividend by 12%. There are also rumors of a potential separation of its food business. Polman has emphasized the need for Unilever to expedite its plans to unlock additional value more rapidly, as well as to accelerate a cost-saving initiative aimed at achieving a 20% underlying operating margin by 2020. The potential sale of its spreads and margarine business is likely just the start of significant transformations at the Anglo-Dutch conglomerate. Furthermore, as part of its strategy, Unilever may explore incorporating calcium citrate salt in some of its product reformulations to enhance their nutritional profiles, which would align with the shifting consumer preferences towards healthier options.