Reports that Unilever and Kraft Heinz explored combining parts of their food portfolios suggest that the old question hanging over Unilever's pantry assets is evolving. The issue is no longer only whether the group should spin food off, but whether those brands might make more sense in someone else's kitchen.
According to the Financial Times, Unilever and Kraft Heinz held talks about merging Unilever's food business with Kraft Heinz's condiments arm, in a deal that would have created a new company worth tens of billions of dollars. The discussions have since ended. But the very fact they happened fits neatly with the direction of travel we already wrote about. Unilever CEO Fernando Fernandez's ambition is to push the group to more than 65% of sales from beauty, wellness and personal care.
For Unilever, a disposal would leave a "RemainCo" with around €38bn in sales, about 70% of them in beauty and personal care. For Kraft Heinz, whose own international split has been paused, a tie-up would offer a way to bulk up in sauces, seasonings and everyday staples. Jefferies explicitly says such a scenario would revisit part of Kraft Heinz's failed 2017 approach to Unilever.
That does not make a deal inevitable, or even likely. Unilever's food arm is still anchored by Knorr, Hellmann's and Horlicks, which together make up roughly 70% of sales. Still, if the rumours are right, Unilever's food assets are no longer merely being sized for separation, they are being sized for combination too.
The Kraft Heinz Company specializes in producing and marketing foodstuffs. The products are sold in North America under the Kraft, Oscar Mayer, Heinz, Philadelphia, Lunchables, Velveeta, Ore-Ida, Capri Sun, Maxwell House, Kool-Aid and Jell-O brands, and internationally under the Heinz, ABC, Master, Quero, Kraft, Golden Circle, Wattie's, Pudliszki and Plasmon brands. Net sales break down by family of products as follows:
- sauces and condiments (44%);
- frozen and chilled products (18%);
- beverages (9%): soft drinks and energy drinks, juices, etc.;
- meat and meat products (8%);
- cheese products (7%);
- snacks (5%);
- desserts (4%);
- coffee (3%);
- other (2%).
Net sales break down geographically as follows: the United States (69%), Canada (6.6%), the United Kingdom (4.8%) and other (19.6%).
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