Comment: Unilever continues pruning food business
Unilever has sold off another food business
Unilever's latest disposal of food assets is just another sign the consumer goods giant is focusing more on its faster-growing home and personal care businesses.
The company yesterday (30 July) announced the sale of its frozen meals operations in North America.
The US$265m deal with ConAgra Foods is the latest stage in Unilever's plan to quit frozen food. In 2010, Unilever quit the frozen food sector in Europe, with the sale of a business in Italy. It sold off the bulk of its European frozen food business in 2006 to private-equity firm Permira in a transaction that included the Birds Eye and Iglo brands.
Martin Deboo, a UK analyst at Investec, says Unilever has a strategy called "The Compass", which outlines how it plans to double the size of the company while growing in a sustainable way. He says Unilever's presentation of The Compass at investor meetings suggest it sees other parts of its operations being the growth engines of its business. "Clearly significant growth is seen as coming from home and personal care and in developing and emerging markets," he tells just-food. A point to note: the bulk of Unilever's sales in emerging markets are from non-food products.
A quick look at Unilever's deal-making in recent years suggest the accent is on growth in home and personal care and focusing on a core set of food operations. It has, for example, acquired the former Sara Lee's global body-care and European detergents operations and the owner of shampoo brands Tresemme and VO5.
Meanwhile, it has offloaded frozen food assets in Italy and North America, a clutch of other food brands in the US and a tomato products subsidiary in Brazil. "There is no doubt in mind that food is not a priority for them, going forward," Deboo says.
Unilever has argued its food business remains important for the company. Analysts have suggested having food, home and personal care products in one business is "old school" but CEO Paul Polman has claimed its non-food unit can benefit from its grocery arm's relationship with retailers.
"If you look at a company like ours, the combination of being in food and the proximity to the market that that gives you is a tremendous benefit in the speed we can roll out our personal care business with the local markets," Polman told the Consumer Analyst Group of Europe's annual conference in March.
However, Polman is a tough strategist and he freely admits each part of Unilever's business needs to "justify" its role in the organisation. Last week, when Unilever reported its half-year results, he said its food operations were improving but he demanded more.
The obvious question is: where could Unilever prune next? Eyes tend to turn to its spreads business but the size of what is an international operation spanning North America and Europe would make it hard to sell. Plus, spreads generates cash for Unilever to invest in its non-food business in markets like Brazil and China.
And, what's more, Unilever's dominant position in the worldwide ice cream sector means it is unlikely to quit that market.
Deboo, reflecting on the planned split at Kraft Foods and the recent speculation around PepsiCo, suggests Unilever could look at spinning off its food business. Analysts, he says, often float the possibility, although he points out there is "nothing in the management's rhetoric" that suggests a spin-off is on the horizon. There is the view, Deboo says, that a split could be tough to achieve, although he believes it would be possible.
"I hold the view you can always separate white collars. Blue collar is where it really matters and, here, you don't make Dove and Flora in the same factory," he says.
Such a move is, of course, theoretical. At present. But while the City speculates, what is clear is that food, bit by bit, is becoming less of a focus for Unilever.
Last week may have been the first week back at our desks after the new year, but we hit the ground running with news that Unilever sold its Skippy peanut butter business to Hormel Foods....
This week saw the debate around the food industry's role in the obesity epidemic come to the fore once again, as the UK Government warned that the industry must do more or face the possibility of legi...
- Premier Foods CEO expects UK supermarket rebound
- Briefing: The risks and rewards of e-tail in China
- Unilever must "speed" response to consumer trends
- Why US diet guidelines should consider environment
- Why Post is increasing its exposure to cereal
- Post Holdings strikes deal to acquire MOM Brands
- Food industry news of week: Unilever, PepsiCo
- Chobani launches Tots infant range
- Premier Foods hails "improving" sales trends
- Crisp maker Sibell acquires Spain's Celigueta
- 10 Key Trends in Food, Health and Nutrition 2015
- The Sugar Backlash and its Effects on Global Consumer Markets
- The Future of Retailing in the UK to 2017
- Global Consumer Trend Framework: Understanding Attitudes and Behaviors that Influence Global Consumption Habits
- Unilever - Strategy and SWOT Report