Sector News

Unilever confirms sale of spreads business

April 7, 2017
Food & Drink

Chief executive Paul Polman said that the ‘faster pace of change’ that is occurring in the market is challenging Unilever ‘to set the bar higher’

Consumer goods giant Unilever has confirmed that it is selling its spreads business, which includes brands like Flora and Stork butter, in a bid to attract greater returns for shareholders and become more focused.

In a statement on Thursday, chief executive Paul Polman said that the “faster pace of change” that is occurring in the market is challenging Unilever “to set the bar higher”.

He said that the company was striving towards being “a leaner and more focussed business” and that as a result of a strategic review, the decision had been taken that the “future of the spreads business now lies outside the group”.

“We feel confident that the changes we are announcing today will accelerate the transformation of Unilever and the delivery of sustainable shareholder value over the long term,” Mr Polman said.

In February, Kraft Heinz dropped a £115bn ($143bn) offer to buy Unilever after the latter said that the bid was too low and carried no “financial or strategic” merit.

A takeover would have been one of the biggest ever in corporate history, and the biggest ever acquisition of a UK-based company by a non-UK one, Thomson Reuters data showed at the time.

Kraft, which is the world’s fifth-largest food and beverage company, has in recent years already been forced to adjust its product range to consumers’ changing preferences and a trend towards fresher, non-packaged items.

In the wake of the failed takeover, some analysts said that Unilever may shift its focus to do the same, giving it the opportunity to enhance shareholder returns.

But Mark Jones, a food and drink solicitor at Gordons law firm, said that Thursday’s move “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,” he said.

“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.”

He added that “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.”

Also on Thursday, Unilever announced it will launch a €5bn share buy-back programme, and will raise its shareholder dividend by 12 per cent.

The company said that this reflects “increased confidence in the outlook for profit growth and cash generation”.

By Josie Cox

Source: The Independent

Related News

September 21, 2020

Alpro announces 30m euro investment and new sustainability goals

Food & Drink

Alpro has unveiled a new five-year health and sustainability action plan, as well as plans to invest €30m in two of its production sites. The objectives laid out by the company, […]

September 18, 2020

Cargill to advance regenerative agriculture practices across 10m acres of farmland

Food & Drink

Cargill has announced that it is supporting farmer-led efforts to adopt regenerative agriculture practices on 10 million acres of crop land in North America by 2030. The initiative will focus primarily […]

September 17, 2020

PepsiCo pilots invisible digital watermark technology to boost recycling

Food & Drink

PepsiCo is trialling products encoded with invisible digital watermarks for more effective recycling. The technology is pegged as the “holy grail” that will make mechanical sorting more efficient. The beverage […]