March 18 - People familiar with recent discussions say Unilever and Kraft Heinz explored a potential tie-up that would have merged Unilever’s food business with Kraft Heinz’s condiments division. Sources indicate the talks have since finished without a deal.
Representatives for Unilever did not provide comment, and Kraft Heinz did not immediately reply to a request for comment. Following reporting on the talks, Kraft Heinz shares fell nearly 4 percent.
The talks considered the combination of several food brands from both groups - a transaction that would have brought together Heinz ketchup and Hellmann’s mayonnaise under a single new company. People involved in the discussions characterized the prospective combined business as being worth tens of billions of dollars.
Observers noted the talks would have highlighted mounting challenges for both consumer-products groups as they confront softer demand for packaged foods and progressively move their portfolios toward faster-growing segments. In recent months, Unilever has been gradually shifting away from food toward beauty and personal care, and it has been reported that it is in the early stages of weighing a separation of its food assets.
For Kraft Heinz, the discussions took place before the company in February decided to abandon plans to split itself into separate businesses. Instead, under Chief Executive Officer Steve Cahillane, who started in January, Kraft Heinz opted to invest $600 million in a turnaround program. The company had earlier paused efforts to pursue a break-up as Cahillane cited deteriorating conditions in the food industry as a factor.
Had the split gone ahead, the plan would have separated slower-growth grocery staples such as Oscar Mayer and Lunchables meal kits from the sauces and spreads division, which includes Heinz ketchup and Philadelphia cheese. The hold on the break-up means those brands remain within a single corporate structure as the company focuses on its turnaround.
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As described by those familiar with the matter, the talks between Unilever and Kraft Heinz are now closed. The discussions and the subsequent corporate decisions at Kraft Heinz underscore the strategic recalibrations occurring within the packaged-foods segment as firms respond to consumer demand shifts and the need for portfolio realignment.