Unilever food exit would require plenty of blush

Loreal SA

18/03/2026 11:26

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Refiles to fix hyperlink formatting in second paragraph.

By Aimee Donnellan

LONDON, March 18 (Reuters Breakingviews) - Nearly 100 years ago Unilever ULVR.L was formed out of a merger between a Dutch margarine producer and a British soapmaker. Today, Fernando Fernández, CEO of the 104 billion pound consumer giant, is looking to unwind that union by splitting the food business from the one that makes Dove moisturiser, according to a Bloomberg report. Focusing on a higher growth area like beauty and domestic products makes sense, but only if Fernández can make the remaining business look and trade more like L'Oréal OREP.PA.

Unilever has been gradually shedding its food empire. In 2017, it flogged its spreads business to buyout giant KKR KKR.N, then four years later it offloaded its tea division to CVC Capital Partners CVC.AS for 4.5 billion euros. Then late last year, Fernández spun-off the company’s ice cream unit which includes brands like Ben & Jerry’s. For Fernández, the business that makes Hellmann’s and Knorr stock cubes may seem like an obvious next candidate for the chopping block.

Food groups are going through a particularly rocky time. Supermarkets have been flooding the market with better quality, cheaper alternatives to branded goods like Hellmann’s and stock cubes for years. These rivals are expected to account for 42% of total grocery sales by 2030, according to McKinsey. Meanwhile, the rapid rollout of GLP-1 drugs is expected to diminish demand for ultra-processed foods like pot noodles. According to analysts at UBS, Unilever's nutrition business is only expected to grow by an average of a little over 2% over the next five years. That’s less than half the over 5% growth beauty giant L’Oréal is expected to deliver over the same period.

These forces explain why on the face of it spinning out or flogging the food unit will not unlock a huge amount of value. UBS reckons the unit will deliver around 2.5 billion pounds of operating profit this year. If that is valued on a 13 times multiple, the average of other foodmakers like Kraft Heinz and Mondelez International MDLZ.O, then it could be worth around 33 billion pounds. Assume the remaining business, which includes brands like Dove moisturiser and Tresemme shampoo is valued like the average of peers Nestlé NESN.S, Reckitt Benckiser RKT.L and Haleon HLN.L at around 16 times 2026 operating profit. Using UBS forecasts, it would be worth 101 billion pounds. The combined value of the two units would total 135 billion pounds, less than 10% above Unilever's current enterprise value of 125 billion pounds. That may be a hard sell to investors given the cost of a split.

To convince shareholders surgery is worth the hassle Fernández will need the beauty business to shine. If he manages to boost its revenue growth rate from around 4% to L’Oréal's over 5% rate, then it could be valued closer to the beauty giant’s 20 times multiple, and be worth 127 billion pounds. That would imply an uplift of nearly 30% to the current enterprise value. For a makeover to be worth the pain, Unilever will need plenty of blush.

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CONTEXT NEWS

Unilever is in the early stages of weighing a separation of its food assets as the consumer goods maker plans to streamline its business, Bloomberg News reported on March 17, citing people familiar with the matter.

Late in 2025, Reuters reported, citing sources, that the company was considering selling historic British brands including Marmite, Colman's and Bovril to focus on beauty and wellbeing.

Unilever declined to comment, when contacted by Reuters.

Shares in Unilever were down 1.6% by 0920 GMT on March 18.

Unilever valuation has recovered as it has focused more on beauty and health https://www.reuters.com/graphics/BRV-BRV/znvnmkdljpl/chart.png

(Editing by Neil Unmack; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on DONNELLAN/Aimee.Donnellan@thomsonreuters.com))