With news that Unilever will sell its spread brands – including Bertolli, Flora, Stork and I Can’t Believe it’s So Good – the question turns to who will swoop in and take the brands over. But with Unilever CEO calling margarines ‘a declining segment’, any potential buyer will need to realise some serious synergies in order for the deal to be worthwhile.
That throws up the usual suspects in big-money deals, but also some of the more established players in the British and European spreads category. Here FoodBev takes a look at some of the more likely companies to take over Unilever’s spreads business.
It was the American food giant that prompted Unilever to conduct a review of its corporate set-up – including a potential change to its dual-listed status and stricter financial measures, like the imposition of a ratio between debt and pre-tax earnings. But Kraft Heinz could, if it wanted to, finally capitalise on the disruptive $143 billion offer that it made for Unilever over a month ago. When that bid was comprehensively rejected in February, FoodBev quoted Euromonitor food analyst Raphael Moreau as saying that Unilever might now be encouraged to pick off parts of its business instead of selling the whole. And with this latest review, that’s exactly what it’s doing. We know that Kraft Heinz has European aspirations, but does it have enough of an interest in Unilever’s spreads brands to make a move – and would it fit with the company’s portfolio of cheese singles and Vegemite?
Dairy Crest is possibly the option with the strongest pedigree in spreads and margarines. It owns the Country Life, Clover and Utterly Butterly brands in the UK, which could easily be assimilated with Unilever’s portfolio of margarine and olive oil spreads. But it remains unclear whether there is interest from Dairy Crest – and whether a merger, given how many leading names Dairy Crest would control, would comfortably make it past anti-trust regulators. Indeed, Dairy Crest hasn’t undertaken a sizeable acquisition since it bought out the remaining 50% stake in its Promovita joint venture with Fayrefield Foods back in December 2015; the venture makes galacto-oligosaccharides for use in infant formula products.
We asked Dairy Crest if they’d like to be involved in this feature, but they declined.
It’s more renowned for its milk than its spreads, but the brands that Danish co-operative Arla Foods owns have some collateral between them. Anchor Spreadable and Lurpak, in particular, are heavy hitters in the world of spreads. But would Unilever’s portfolio offer enough of a difference to Arla’s existing offering, and would it be willing to take a leap of faith into a potentially non-core market? The cooperative describes Lurpak is ‘its hero in the butter, spreads and margarine category’, with volume growth last year of 7.7%. In fact, butter and spreads is one of the eight key areas of Arla’s business. Despite this, most of the company’s acquisitions in recent times have been in milk processing. But it does still have €120 million remaining from the sale of Rynkeby Foods for strategic investments, as FoodBev reported last month.
We asked Arla Foods if they’d like to be involved in this feature, but they are yet to respond.
Who else could be interested in taking over Unilever’s spreads business? Lactalis McLelland could bolster its portfolio, which includes Président butter and has recently added spreadable versions of its Seriously Strong cheese. Raiso, the maker of Benecol spread, could also be in line for a takeover – but that would presumably be a very big leap from its current portfolio of products.
Talking about Unilever’s decision to sell its spreads business, Mark Jones, a food and drink solicitor for Gordons law firm, said: “Unilever’s move to separate and sell off its margarine division is not simply about satisfying shareholders who are unhappy about the business rejecting Kraft Heinz’s takeover bid.
“The Kraft bid was motivated by the changing consumer market, and Unilever is now making its own moves to adjust.
“Packaged food growth has been slowing for some time, and while the margarine business remains very profitable, consumers are moving away from the spread in search of healthier alternatives.
“Unilever has never carried unprofitable brands. One of the reasons it is so successful is because it buys and sell brands at the right time and in this case, parting ways with its margarine division, whilst the going is still good, will enable it to focus on markets which are likely to keep growing in the medium term.”
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