Unilever Plc’s (UL) food division, which constitutes a quarter of its total sales, has been decelerating for many years mainly due to a slowdown in its margarine and spreads businesses, as U.S. consumers prefer butter over margarine due in part to a perception that margarine is less natural.
The consumer product giant has made a lot of effort to improve its ailing spreads business and has launched new margarine products in Germany, the United States and Britain that highlight naturalness and health. However, Unilever failed to turn around this business and the margarine market continued to remain a drag on top-line growth.
Unilever has thus finally decided to separate its North American and European spreads business into a standalone unit in order to improve the company’s performance, per sources.
Reportedly, the spreads business, which includes Flora and Bertolli margarine, will be renamed as Unilever Baking, Cooking & Spreading, and will continue to be owned by Unilever. The business will have its own management team but will report to the company’s foods division. The separated unit is expected to be fully operational by Jul 2015.
The announcement of the split has led to speculation about a possible exit from the business. However, the company stated that it doesn’t plan a sale or spinoff of the new business.
By separating the division, Unilever believes that it will be able to focus more on it and thus concentrate more on stabilizing sales and improving its bottom line.
Of late, the consumer products giant has been focusing on its health and beauty business, while selling its slower-growth food brands, mainly in the U.S. In Jul 2014, it divested its Slim-Fast trademark and the global Slim-Fast business portfolio. (Read: Unilever Sells Slim-Fast Brand; Remains Focused on Core Business). Unilever has also sold pasta sauces brands, the meat snacks business and hair care brands to name a few.
In Oct last year, Unilever sold its Wish-Bone salad dressing business to food company Pinnacle Foods Inc. (PF), while in Jan 2013, the company sold its Skippy peanut butter business to Austin, MN-based producer of branded food and meat, Hormel Foods Corp. (HRL).
Unilever currently holds a Zacks Rank #4 (Sell).
Aramark Holding (ARMK) is a better-ranked consumer staple stock sporting a Zacks Rank #1 (Strong Buy).
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