Unilever Explores Sale of Food Division Amid Industry Shift

Unilever’s potential divestment of its food division to McCormick & Company reflects a broader global shift in the packaged food industry driven by declining volumes, health-driven consumption changes and private-label competition. The move underscores a strategic reallocation toward higher-margin beauty, personal care and health segments, with implications for multinational operations and supply chains, where processed food demand, retail dynamics and regulatory pressures are evolving. Food manufacturers, retailers and investors face increasing pressure to adapt portfolios to healthier, value-oriented consumer trends.

Unilever is in talks to sell its food business to McCormick & Company, as it accelerates a strategic shift toward higher-growth areas, particularly its beauty, personal care and health segments. Unilever said Friday it received an unsolicited offer from the spices and condiments manufacturer, although there is no certainty the deal will go through. The company emphasized that it still views its food division as a highly attractive business with a strong financial profile supported by leading brands, and expressed confidence in its future within the group.

Unilever’s food business generated more than US$14.91 billion in sales in 2025, roughly a quarter of its total revenue, according to its annual report. However, this represented a 3.2% decline compared to 2024, while volume growth stood at just 0.8% over the same period.

The segment’s portfolio includes brands such as Colman’s, Knorr stock cubes, Maille Dijon mustard, Namdong instant noodles, and Marmite spread, among others. Within this portfolio, Hellmann’s and Knorr account for about 60% of total segment sales, a share the company expects to increase to between 70% and 75% following the divestment of smaller local brands.

This slowdown is not unique to Unilever. The large-scale food industry has been undergoing a deep transformation for several years due to multiple structural factors. According to MarketScreener, persistent post-pandemic inflation has driven supermarkets to expand their private-label offerings, often priced two to three times lower than branded alternatives, capturing market share and contributing to structural declines in sales volumes.

At the same time, shifting consumer preferences toward healthier diets, particularly in the United States and Europe, are driving demand for fresher foods with fewer artificial ingredients. This trend is reinforced by health policies and public discourse led by figures such as Robert F. Kennedy Jr., which are increasing scrutiny on ultra-processed foods and their links to chronic conditions like obesity and diabetes.

Additionally, the rise of GLP-1 weight-loss drugs is beginning to reshape consumption patterns. Medications such as Ozempic and Wegovy reduce daily caloric intake by 720 to 990 calories and lower demand for ultra-processed foods. This is already reflected in spending behavior, as households with GLP-1 users spend about 4% less on groceries within the first six months, according to EMARKETER.

The potential sale of the food division aligns with the strategy of Fernando Fernández, CEO, Unilever, to pivot the company toward faster-growing non-food categories. Last year, the company completed the separation of its global ice cream division by creating The Magnum Ice Cream Company, an independent entity that includes brands such as Magnum, Ben & Jerry’s and Cornetto. Through this transaction, Unilever divested approximately 80% of the business.

Under Fernández’s leadership, Unilever aims to transform into a company focused on beauty and personal care, where growth potential and margins are more attractive. In 2025, the personal care segment was the largest, generating US$15.34 billion in revenue. Brands such as Dove soap and Liquid IV hydration drinks have become central pillars of this new strategy, according to the CEO.

Analysts at Barclays estimate the enterprise value of Unilever’s food division at around US$32.38 billion, a figure that could exceed McCormick’s financial capacity. The US company has a market capitalization of approximately US$14.5 billion, significantly smaller than the potential value of the business it is pursuing, while Unilever’s total market capitalization stands at approximately US$136 billion.

“This potential deal looks complex, Unilever Food generates roughly three times McCormick’s profit, so it is unclear what value could be created as a combined entity and what structure could deliver value to shareholders,” said Tineke Frikkee, Unilever investor.

McCormick’s most significant recent move came in 2020, when it paid about US$800 million for Cholula hot sauce. In 2017, it invested US$4.2 billion to acquire Reckitt’s North American food business, including brands such as Frank’s RedHot and French’s mustard. The company has also bid for other condiments and spices manufacturers without success. 

Bernstein analysts noted that while McCormick’s size could complicate a deal, alternative structures could help make it viable. “A likely structure would resemble a Reverse Morris Trust transaction, with Unilever essentially spinning off its food division and then merging it with McCormick, leaving Unilever shareholders with a majority stake in the combined entity,” they said.

Recently, Unilever also held talks with Kraft Heinz. According to the Financial Times, the plan involved combining Unilever’s food business with the US group’s condiments and sauces division, bringing together iconic brands such as Heinz ketchup and Hellmann’s mayonnaise. However, negotiations stalled after Steve Cahillane decided to pause the company’s breakup plans to focus on revitalizing its core business.