Unilever selling its spread brands: will this lead to more divestment?
Unilever has announced it is looking to sell its margarine business, which includes major brands Flora and Stork. Though this part of its business is valued as high as $6bn, Unilever’s margarine brands have achieved very slow growth within an industry category that is struggling due to shifting consumption patterns. Consumers are eating on the go more often, which cuts out this category, and those who prepare meals are becoming increasingly health conscious and aim to cut full fat spreads out of their diet.
This news was expected, however, as Unilever directors have recognised the need to assure shareholders the company will cut costs and raise profit margins in the wake of the failed takeover bid by Kraft Heinz - as that’s what Kraft Heinz were offering as a core part of their offer.
What is surprising is the length the company will go to do this; CEO Paul Polman suggesting for example that the company will consider ending its dual-listed status as an Anglo-Dutch company, appeasing some shareholders who feel the system brings increased costs due to two separate corporate structures.
This raises another question - will Unilever consider divesting itself of more of its diverse range of business sectors in order to raise profitability? There have been suggestions it may even rid itself of its entire food portfolio, but having been a major part of the business for almost a hundred years, and when brands such as Wall’s continuing to see strong growth, this seems unlikely.Unilever may instead look to prune smaller, slower growing categories within food in order to streamline their operations.