Sector News

Unilever says to form standalone spreads business unit

December 4, 2014
Food & Drink
(Reuters) – Unilever (ULVR.L) (UNc.AS) plans to form a standalone business unit for its North American and European spreads as it struggles to turn around a business hit by a fall in bread and margarine consumption, its chief financial officer said on Thursday.
 
The unit will be called Unilever Baking, Cooking and Spreading and will give the business more focus and more freedom to take necessary decisions, CFO Jean-Marc Huet said during an investor seminar that was simultaneously webcast.
 
“We’re going to provide even more focus to this business, the speed of execution should increase over time, and the category will be permitted to take more radical action if required,” Huet said. He did not elaborate on “radical action”.
 
Right now, spreads are part of Unilever’s overall food business and make up 27 percent of that segment’s sales.
 
Shares of the Anglo-Dutch company jumped as much as 3.3 percent in Amsterdam and 3 percent in London, as some investors saw the news as a first step toward a possible exit of the business, which accounts for 7 percent of Unilever’s total turnover of nearly 50 billion euros with brands like Flora, Becel and Rama.
 
Yet the company denied that, saying the unit remains “a core part of our business and the cash delivery is important to us”.
 
“We are not planning to sell or spin-off spreads,” a spokesman said.
 
Morningstar analyst Philip Gorham said Unilever has been unable to turnaround the business, whose sales fell 3.2 percent in the first nine months of 2014 after falling 3.1 percent in 2013 and growing just 0.9 percent in 2012.
 
“This will generally be seen as a positive, I would think. They are saying they won’t spin it off, but clearly look at this business as non-core now, so this could be the first step to doing just that,” Gorham said.
 
Given its poor performance and the fact that Unilever has been pruning its portfolio recently, industry sources have been speculating over whether the spreads business could be the next one to go. Unilever recently sold its Slim-Fast brand, its Ragu and Bertolli pasta sauces, Skippy peanut butter and Wishbone salad dressings.
 
Another way Unilever is simplifying its business is by reducing the number of package sizes and product formulations it sells. For example, Huet said it would cut by 80 percent the number of formulations in both its laundry and hair care businesses.
 
(Reporting by Martinne Geller in London; editing by Jason Neely and Vincent Baby)

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