17 Nov 2011 Unilever likely to divest individual food brands: Fitch
British-Dutch consumer goods company Unilever is likely to reduce its exposure to low-margin food business by divesting individual brands, according to the rating firm Fitch Ratings.
The company is likely to use the proceeds from the divestment to fund acquisitions in the high-growth personal care business, especially in the emerging markets.
The ratings firm said that Unilever may sell its brands in savoury, dressing and spreads business, where the scope for growth is weakest and where the company has little ability to add value through innovations in packaging and recipes.
The small divestments will add value to the company and they would also be easier compared to finding a single buyer for a particular food category, the Wall Street Journal reported.
In November, Unilever agreed to sell its Culver Specialty Brands division, which became a part of the company following the acquisition of Alberto Culver, to US-based B&G Foods for $325m.
In addition, the company continues to focus on its personal care business. Recently, the Unilever acquired 82% of Russian beauty company Kalina and also announced €90m investment to build a new, state-of-the-art personal care factory in Indonesia.
This story has also been covered and confirmed by the Financial Times that reports Unilever is exploring options to restructure the food side of the company’s business, including potential divestitures of its low-margin food operations.
Quoting unnamed industry bankers, it says that earlier this year, the Netherlands and UK-based consumer giant started evaluating options for its so-called condiments business, which includes Hellmann’s Mayonnaise and its cooking oils and spreads, for a possible divestiture.
Unilever’s board is concerned about the company’s dependence on food product sales in North America and Western Europe, where food consumption is slowing down, and the slowdown has weighed on Unilever’s valuation, said the sources, adding that one of the options the company has looked at in recent months is reducing Unilever’s North American food business that has shown no growth in the past two years.