My father spent 39 years at Nestlé, and often described the food business as one of the most operationally-demanding areas in consumer goods.
Unpredictable costs, complex supply chains, and intense retail competition make it really difficult for even leading brands to keep growing the bottom line.
So Unilever’s decision to combine its foods business with McCormick & Company isn’t a retreat from food, but a re-focus on areas where it can naturally make more money.
For decades, Unilever’s foods portfolio, which included global brands like Hellmann’s and Knorr, built deep consumer trust and helped define modern brand management.
But while food categories are culturally relevant, they usually have thinner margins and are much more of a logistical headache than beauty, personal care, and home care.
Where brand legacy and financial returns collide
This type of portfolio realignment has become more common as public CPG giants are pressured to improve margins, and avoid lines of business that don’t pay off.
These companies are increasingly separating their low-margin businesses that need massive scale just to break even, from their businesses selling premium products where price increases won’t scare customers away.
Unilever is giving ownership of its storied food brands to a company focused on flavor and seasoning.
McCormick also operates a business model built around ingredients and taste, so it can be more efficient and innovate on its products much better than a diversified conglomerate like Unilever.
Here’s what marketers can learn from this
First, companies are going to invest in products that make the most money.
Even iconic brands aren’t going to get funded if they’re selling low margin products in a sprawling portfolio. Marketers need to understand this to build strategies that align with their organization’s financial priorities.
Second, deep focus can create a better future for a brand.
Given McCormick’s expertise, Unilever’s food products may benefit from a different product roadmap, partnerships with other brands, and different positioning. These factors can impact how quickly new food products are released, where media is allocated, and potentially lead to bolder marketing creative.
Third, this deal reflects a greater trend of CPG businesses trying to simplify
Rather than managing sprawling portfolios across unrelated categories, companies are increasingly concentrating resources where they believe they can be most competitive and maximize value for shareholders.
