Is Kraft Heinz dropping the Unilever acquisition just an interlude?

(c) 2012 Convergence Alimentaire blog image

I cut my FMCG marketing teeth at Unilever and ended my full-time global food & drink industry career at Kraft/Mondelez. I now run a healthier drinks startup business (drinktg.com) alongside a global innovation consultancy where I work as an "extrapreneur" supporting companies wanting to remake their portfolios to better fit emerging consumer needs for healthier products......so I am perhaps in a unique position to give a point of view. 

If you are Dutch or British, you feel closer culturally to Unilever and few people living in the UK will have forgotten Kraft's poor treatment of people & assets post Cadbury's acquisition. However, the reality is that the vision and values of both companies are not so dissimilar and both are facing the same fundamental shifts in consumer behaviour & needs in relation to "big FMCG/CPG" brands in both developed and the "developing" world.

Are Warren Buffett (a Kraft/Heinz director) & co right to kick off this M&A? The acquisition makes sense for Kraft/Heinz as it gives them a route to market for complementary brands in emerging markets and improves their revenue growth targets in key food categories. 

If the acquisition proceeds, who will be the ultimate winners & losers? Will consumers in emerging markets benefit from having more sustainable food & drink on shelf? Will it lead to higher prices for products folks need each day? Who will benefit from the likely need to sell off certain food brands e.g. sauces? Will it lead to more consolidation and, if so, is this a good thing for consumers, for communities? If Kraft/Heinz backs off in the face of public backlash, do we believe this is really the end of the opera or just an interlude?

As mentioned before, I worked in the past for both of these behemoths so understand acutely their methods of penetrating market sectors with heavy "benefits led" marketing and then, once consumers have adopted the products, cost engineer out product features to maximize profit for a closed ecosystem of company executives, ad agencies & suppliers, and institutional shareholders. Past M&A involving the likes of Colgate, Kraft, P&G, and Coke have largely been cost reduction exercises to the detriment of consumers, employees, and communities. The food & drink landscape is however undergoing huge fundamental changes in both developed and emerging markets. One can only hope that folks like Warren Buffett (who I admire immensely) have different intentions towards a potential Unilever acquisition.

Still, Kraft/Heinz’s efforts to engineer an audacious takeover of Unilever point to another fundamental problem i.e. Unilever has not fully embraced emerging market trends towards healthier food & drink in the way Nestle and PepsiCo have done so it (Unilever) was always vulnerable to this type of takeover. For example, they spent millions of dollars fighting smaller, healthier rivals like Hampton Creek when they should have been figuring out instead how to collaborate with more nimble startups. Campbell Soup and General Mills have shown that their respective Acre Venture Partners and 301 Elevate scale-up programmes can deliver the right kind of growth (much better than Unilever's Foundry programme which focuses on ways to connect better their existing out-of-touch brands with "millennials")! 

Coca-Cola shareholders should pay attention to what happens next.

Love the post? Hate the post? Have other ideas? Please leave a comment below. If you would like to discuss this or a related topic, please contact me on snadur@ID2L.com (Ideas 2 Launch Ltd) or connect with me here on Linkedin. I am based in London, UK, but globally mobile. I will also be visiting Gulfoods 26-27 Feb, in Shanghai presenting at the FBIF conference 19-21 April, and in Singapore presenting at a Food Vision Asia conference 26 April.

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