Unilever's Give and Take: Divesting a Century-Old Food Business to Create a $20 Billion New Flavoring Giant

Ask AI · Why did Unilever cut its century-old food business amid industry competition?

Our newspaper (chinatimes.net.cn) reporter Fang Fengjiao Shanghai report

On March 31, Unilever officially announced the merger of most of its food business with U.S. condiment company McCormick. After the deal is completed, a global food giant with annual revenue exceeding $20 billion will be born, and Unilever will bid farewell to its food business entirely, focusing fully on beauty and health, and personal care sectors. This transaction not only marks the end of Unilever’s nearly century-long food business layout but also will give rise to a new leading enterprise in the global spice, seasoning, and sauce markets.

In response, a relevant Unilever executive told Huaxia Times that currently, the only information they can share with the media is the press release on their official website.

Chinese food industry analyst Zhu Danpeng told Huaxia Times that Unilever’s decision to split its daily consumer and food sectors is a helpless choice. In the context of the industry entering a phase of intense competition, this split is a scientific, reasonable, and wise decision.

Unilever’s Helpless Split

According to the agreement, Unilever will receive 65% of the merged company’s shares and $15.7 billion in cash. The divested food business is valued at about $44.8 billion. The deal is expected to be completed by mid-2027, pending approval from McCormick’s shareholders and regulatory reviews in multiple countries.

Zhu Danpeng further analyzed that the lack of synergy between Unilever’s daily consumer and food sectors, along with significant differences in management systems and product categories, makes integration difficult. From staffing, departmental communication, to channel empowerment, the overall effect is no longer “1+1=2” or “1+1>2,” but possibly “1+1<2.” Based on this reality, Unilever chose to split at a time when industry competition is intensifying, to concentrate resources on more growth-potential businesses.

The merger adopts a “reverse Morris trust” structure, aiming to reduce tax costs and improve net income. It should be noted that the divested food business does not include India operations or other minor units. The scope covers well-known Unilever food brands such as Knorr, Hellmann’s, Lipton (partially sold), and McCormick’s seasoning product lines.

Unilever stated in its announcement that after the deal, the company will no longer retain any food business, and resources will be fully redirected toward beauty and health, and personal care. In recent years, Unilever has continuously adjusted its business structure, selling assets like tea businesses and some spreads. This large-scale divestment of its food sector is the most thorough step so far.

For McCormick, this merger will provide access to Unilever’s global food network, especially in emerging markets, further expanding market share. Unilever’s shareholders will ultimately hold a majority of 65% in the new company, but the business operations have been clearly separated.

Looking back at Unilever’s food business history, it dates back to 1929 when Dutch margarine company merged with British Lever Brothers. Over nearly a century, Unilever acquired globally renowned food brands like Knorr, Hellmann’s, Lipton (partially sold), forming a vast food empire across seasonings, soups, sauces, tea, ice cream, and more. However, with rising consumer health awareness and changing eating habits, growth in traditional food businesses has slowed, and profit margins are much lower than in beauty and personal care.

According to Unilever’s financial reports, in 2024, its food business contributed less than 20% to the group’s revenue, down from about 30% ten years ago. In 2025, its food revenue is projected at €12.9 billion (about RMB 105.8 billion), accounting for 26% of total revenue. Meanwhile, the gross profit margin of beauty and health products has long been maintained above 45%, far higher than the roughly 28% of the food sector. This significant profitability gap has forced Unilever’s management to reconsider the strategic positioning of its food business.

The Future of the New Giant

In China, Unilever’s food business has long relied on restaurant channels, with key products including Knorr chicken essence, soup bases, and sauces; McCormick’s focus is more on Western fast food and home baking seasonings, with longstanding partnerships with KFC, McDonald’s, and other Western fast-food brands. Their channel and category complement each other.

Whether the new company can achieve true resource sharing in China depends on subsequent integration strategies. Unilever’s local supply chain and restaurant service team are relatively mature, while McCormick’s strength lies in brand management and standardized product capabilities. The integration may face management culture and market approach challenges.

Zhu Danpeng believes that this adjustment will impact other seasoning companies. Previously, Unilever invested limited resources in its food sector; after establishing the new company, it will become more focused and professional in food, which is not good news for competitors. But he also emphasized that the final effect depends on the overall integration between Unilever and McCormick, as well as the future strategies of the new CEO, which remains to be seen.

Market generally believes that this merger will have limited impact on Chinese seasoning giants like Haitan Weiye and Lee Kum Kee. This is mainly because their product flavors, channel layouts, and consumption scenarios differ significantly: Unilever and McCormick’s core products are more aligned with Western cuisine and processed foods, while Chinese seasonings rely on local eating habits and cooking styles, forming relatively independent markets. Over the long term, Western and Chinese seasonings have developed separately in China, with little overlap—foreign brands dominate Western seasonings, while local companies leverage long-standing channel networks and flavor adaptation. Therefore, even if the new company’s scale expands significantly, it will be difficult to break the existing market boundaries in the short term.

Globally, the combined revenue scale of the new company will be significantly larger, creating more direct competition with giants like Kraft Heinz, which has faced dual pressures from Hellmann’s and McCormick. Post-merger, the new company will have stronger synergy in product R&D, supply chain integration, and global distribution networks, likely further eroding Kraft Heinz’s market share. Additionally, Nestlé’s Maggi and various local seasoning brands also form a multi-layered competitive environment. As the world’s largest food company, Nestlé has been accelerating its product portfolio adjustments, selling off non-core assets like U.S. candy and skin health businesses, but has retained Maggi as a core seasoning brand, highlighting the strategic importance of seasonings in global food giants.

It’s worth noting that after this deal, Unilever will transform from a diversified fast-moving consumer goods giant spanning personal care, food, and beauty into a specialized company focused solely on beauty and health, and personal care. This strategic shift is not unique in the FMCG industry. P&G previously divested of snacks like Pringles and batteries like Duracell, focusing on household, beauty, and personal care; Nestlé has continuously strengthened its core food and beverage business while selling non-core assets like skin health. Unilever’s complete exit from food signifies a move closer to P&G’s approach than Nestlé’s, choosing “specialization” over “diversification.”

However, whether the $20 billion annual revenue can translate into sustained market advantage remains to be seen. Cross-border, cross-category integration of large companies often faces challenges in supply chains, brand positioning, and organizational culture. McCormick, with over 130 years of history, has a corporate culture and decision-making process quite different from a large FMCG group like Unilever. Unilever’s food team is accustomed to matrix management and global branding, while McCormick emphasizes product R&D and customer customization. Whether they can effectively integrate R&D, production, and sales will be key to the new company’s future competitiveness.

Moreover, although Unilever has transferred the operational rights of its food business entirely to McCormick, holding 65% of the new company’s shares still gives it significant financial influence. This “business split, capital retention” arrangement is uncommon in large FMCG mergers. In the future, if the new company underperforms, Unilever might intervene at the board level or choose to further reduce its stake, which will attract market attention.

The deal is expected to close around mid-2027, when the integration effects will gradually emerge. Under multiple challenges like global inflation, supply chain restructuring, and consumer fatigue, whether this nearly century-long strategic shift can open new growth space for Unilever, and whether the new $20 billion condiment giant can stand firm amid fierce competition, remains to be seen over time.

Editor: Xu Yunqian Chief Editor: Gong Peijia