Although Kraft Heinz’s approach to Unilever quickly came to nothing, with Kraft Heinz withdrawing its proposal for a merger almost as soon as Unilever rejected the idea, the development has been a catalyst for Unilever to undertake a fundamental review of its operations. No decisions will be taken until the review is completed in April, but analysts and investors are now actively starting to speculate about the assets that Unilver may sell or spin off.
There is some support for the suggestion that Unilever may spin off its food division into a separate company altogether. Unilever’s food division accounts for around one-quarter of group sales and is a world leader in many categories such as ice-cream, tea, and spreads. Brands include icons such as Marmite, Hellmann’s, Flora, Knorr and Lipton’s. Such a discrete unit would be attractive to many global consumer goods and private equity companies, with Kraft Heinz an obvious candidate to make a renewed approach for the division
However most analysts, such as Philip Gorham at Morningstar, suggest that Unilever is likely to stop short of separating the food business completely from the larger personal products division. More likely, in the opinion of most, is the selective disposal of particular product lines or brands.
The most frequently mentioned such division is the spreads unit. This encompasses brands such as Flora, Becel and Bertolli. Volume growth in this division has been subdued for years, as consumers focus on healthier lifestyles. Andrew Wood at Bernstein describes the sale as “vital.”
James Targett at Berenberg suggests that the ice-cream business, which includes Magnum, Carte D’Or and Walls among other brands, should also be a candidate disposal. Others speculate that individual brands such as Knorr will also come under the severe scrutiny.
The company declines to speculate until the review is completed.