Unilever could soon be selling another food brand. The company, which has offloaded a number of food assets in recent years, is understood to be on the look out for a buyer for its Peperami snack brand. While Unilever has declined to comment on the reports, analysts have offered their views as to who might snap up this “animal” of a brand.
The news Unilever is looking for a buyer for its spicy pork salami brand Peperami is, given the recent M&A activity at the consumer goods giant, not a huge surprise.
The spreads-to-ice cream maker has appointed investment bank UBS to help conduct the sale, just-food understands, and comes just a month after reports emerged it was looking for a buyer for its Wish-Bone salad dressings business in the US. Unilever has proved as equally coy on Wish-Bone as on Peperami but the two brands fit the recent strategic pattern at the company, which it insists it remains committed to food. That is to offload food brands, particularly those only present in a small number of markets, to divert resources towards its international food operations and, most notably, its faster-growing home and personal care operations.
In recent years, to pick a few deals, Unilever has sold its Skippy peanut butter, its Culver Specialty Brands and its frozen meals businesses in the US and offloaded the UK and Irish rights to cooking sauces Chicken Tonight and Ragu. Its acquisitions have focused on non-food; 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. In sum, 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. The search for a buyer for Peperami fits that strategy.
Euromonitor senior company analyst Ildiko Szalai points out to just-food Unilever has indeed been shedding its flagship brands “left, right and centre”, with a focus, she says, on the “low profit ones”.
“Unilever are always questioned at analyst meetings about whether they will sell off the [entire] food division and they always give the same answer, that no it is a cash generator. But bit by bit they are selling the [food brands] off. So this is not surprising, it’s a straight line continuation of what they’ve been doing for years.
“If they say they are keeping the food division as a cash generator they maybe want to keep the high margin assets and whatever they shed are either low growth or low margin.”
When it comes to food, Szalai suggests Unilever’s focus is purely on brands and not categories.
“It has four or five very flagship labels in very diverse categories from stock cubes to ice cream to spreads. It’s not even that they’re focusing on one category, they’re focusing on brands, strong brands, brands that can be launched into new markets, like they did with Magnum in the US. These brands have the advantage that they can enter new markets, fill white space, grow fast there and Peperami probably just didn’t make the short-list on this one.”
Peperami is manufactured by Unilever in Germany, Mexico and the UK. In Germany it trades under the name BiFi. Euromonitor was unable to provide any market share data on the product due to its “uniqueness” but a number of companies have been mooted by analysts as potential acquirers of the spicy salami brand.
Glenboden analyst Stefan Kirk suggests UK pie manufacturer Pork Farms Group as a candidate. The company is well-known for its pork pies but also produces sausage rolls, slices and scotch eggs. The firm had a co-branding initiative with Peperami a few years ago, Kirk says. “Peperami would allow the group to move into the higher-margin snacking segment, and increase its branded weighting in sales,” he explains.
Kirk does, however, question whether Pork Farm’s private-equity owners, Vision Capital, would want to keep investing given they’ve owned the group since 2007.
Szalai suggests Kerry Group. The Irish firm has a UK subsidiary, Mattessons, which manufactures processed-meat based products, particularly sausages and pâté. Peperami could sit nicely alongside its Fridge Raiders line.
Private equity, Szalai says, is also a possibility. However, she adds: “If the brand is being sold because it is low profit then I doubt private equity would go after it unless it has a great idea on how to turn it around. Private equity [firms] are notorious for going for growth and profit so they don’t really go for companies that are underperforming.”
Szalai, however, has her money on the buyer of Bernard Matthews Farms. The UK poultry producer last month admitted it may look for outside investment and 2 Sisters Food Group is reportedly considering a bid for the business. Marfrig’s European arm Moy Park and UK chicken processor Faccenda Group were also mooted as possible investors in or bidders for Bernard Matthews.
“Peperami is such a unique product that you would need either a specialist like Pork Farms … or a company that might buy Bernard Matthews, so maybe a very similar asset. Whoever buys Bernard Matthews would go for this brand.”
Szalai believes the uniqueness of the product means the brand will certainly attract interest but ultimately “won’t go fast”.
Nevertheless, Peperami is the latest part of Unilever’s food business, weighted as it is to the slower-growing markets of Europe and North America, the company is looking to sell as it sharpens its food portfolio and focuses on faster-growing or more profitable assets.