- Recent reports suggest that Unilever is considering splitting its food and home and personal care units, according to Just Food.
- Soon after the giant British and Dutch company rejected a takeover offer from Kraft Heinz, Unilever CEO Paul Polman promised a strategic review of the company's operations to "accelerate" shareholder value. A full report is due in April.
- Unilever's food division is a relatively small part of the larger company. It includes brands like Hellmann's, Knorr, Lipton, Breyer and Ben & Jerry's.
After hubbub in recent weeks about Unilever's rejection of Kraft Heinz's $143 billion offer, many larger shareholders and analysts are pushing for the company to split off its foods segment. Top investors say that the food unit is dragging down the larger company's profits. According to The Telegraph, personal care brands make up about 60% of Unilever's business, and they are growing at a rate of 4.2%.Food makes up nearly $10.6 billion of Unilever's sales and is growing at a rate of less than 2% as consumers move toward more natural options.
Separating food from personal care could unlock better stock values for both units, analysts and investors told the Telegraph. The thriving personal care brands could be leveraged as a higher value stock, while the struggling food brands could be seen as an opportunity for growth. Or its food brands could consider becoming an acquisition target.
But given that Unilever is a multinational-based corporation, a split isn't as simple as it sounds. British and Dutch investors are both entitled to tax credits when they invest in Unilever. Splitting the divisions could end in high taxes for European investors.
If the company is broken apart, the food segment could become a valuable acquisition for a CPG company — including Kraft Heinz. As long as the international details can be worked out, the question remains as to why Kraft Heinz pursued Unilever in the first place. Was the company looking to diversify its portfolio beyond food? If that's the case, a split Unilever may not be the best fit.
However, Unilever is the world's leader in ice cream, holding a 22% share of the world's market for the frozen confection and owning eight of the top 15 selling brands. With this kind of portfolio, it would fit in with many other major manufacturers — like General Mills, which is currently concentrating on ice cream to fight flagging consumer interest in its cereals and yogurts.