Unilever's margarine sale in final stretch | RetailDetail

Unilever's margarine sale in final stretch

Unilever's margarine sale in final stretch
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Unilever’s margarine division sale is picking up pace, because interested parties have to table a bid before 19 October. Apparently, mostly investment funds have expressed an interest.

Six to seven billion

Unilever hopes the sale will generate between six and seven billion euro. It put the division up for sale in the spring, and investment funds like Blackstone, CVC and GIC (from Singapore) have been the main interested parties. Its competitors, like Dairy Krest and Kraft Heinz, are not planning on tabling a bid apparently, according to FD.

 

Whoever buys the division, will not have an easy job to profit from margarine sales. According to one of the companies, the margarine market has been in a 6 % annual slump for several years already, even with Unilever cutting costs a lot. The new owner will have to invest in innovation and product development before any possible major profit flows back.

 

Image issues

Margarine has struggled with its perceived image for several years. It had been touted as a healthy butter alternative, but the consumer has flocked back to butter recently in its desire to have organic food. Margarines are considered an artificial product, which damages its image.

 

“Saturated animal fat has been given a more positive health status, because several studies and articles claim these are not as bad for your health as previously expected”, Rabobank dairy analyst Richard Scheper said. The buyer will therefore have to try to give margarine a healthier image.

 

Consolidation

The question is whether that could actually work, because margarines have always been an important part of Unilever and that company could not even stop the slide. Even if the new owner were to spend money on a major marketing campaign, the results are completely unsure. An unhealthy image also largely negates the effects of price cuts.

 

One solution to the smaller market is to create efficiency, like through mergers. About twenty major companies (including Unilever, Dairy Crest, Yidiz and Bunge) dominate the margarine industry. To deal with the surplus in production, companies have to consolidate, but it seems the competitors have no interest in doing so. Chances that an investor want to consolidate too, are very small.

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