Ragu Sauces

Unilever to sell sauce brands to Mizkan for $2.15bn

Unilever has said ‘ciao’ to its Ragu and Bertolli pasta sauce business, agreeing to unload it to Japanese food manufacturer Mizkan Group for about $2.15 billion as the maker of Dove skin creams continues to shed food brands.

The deal transfers Ragu, the best-selling US pasta sauce that helped popularise Italian food in America, into the hands of a closely held Asian company founded 210 years ago. Together, the brands have annual sales of more than $600-million, London-and Rotterdam-based Unilever said in a statement.

Under CEO Paul Polman, Unilever has focused on its health and beauty business while selling slower-growth food brands, mainly in the US. For Mizkan, the deal, its largest ever, enhances its North American exposure, which it has been growing via acquisitions to reduce its reliance on a shrinking population in Japan.

“The deal is the tip of the iceberg of upcoming Japanese food and beverage makers’ outbound acquisitions to counter slowing domestic demand,” said Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo.

The food company, based in Japan’s Handa City, makes condiments including mustards and rice wine. Mizkan unveiled a five-year plan in January, saying it needs to expand overseas as the Japanese population shrinks. The company was founded in 1804 to make vinegar from the leftovers of sake production.

In 2005, Mizkan bought Holland House cooking wines and in 2011 it purchased Border Foods, a processor of hot peppers. Mizkan has also expanded in Britain, acquiring the Branston range of pickles and sauces from Premier Foods Plc earlier this year. Today’s deal includes two US production facilities.

Unilever’s food unit, which does not include its tea and ice cream business, accounted for 35 percent of sales in 2008, the year before Polman took the helm. Today, it’s 27 percent.

“This sale represents one of the final steps in reshaping our portfolio in North America,” Kees Kruythoff, president of Unilever’s business in that region, said in a statement. Unilever is still looking to sell its Slim-Fast diet food business, which it put under review along with the pasta brands earlier this year.

Founded in Rochester, New York, in 1937 and acquired by Unilever in 1987, Ragu accounts for about 40 percent of Unilever’s $1.2 billion pasta-sauce sales, according to data tracker Euromonitor International. Sales have declined 18 percent since 2009, hurt by the encroachment of private-label sauces, which now account for about one quarter of the market.

The $2.6 billion North American pasta sauce category has grown by only 1.3 percent since 2009, according to Euromonitor. Still, Ragu is the best-selling sauce in the US, with 25 percent of the market. Campbell Soup’s Prego brand is second with 17 percent. Bertolli is the second-largest brand in the US premium pasta sauce market…..

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