Consumer products giant
) has completed the sale of its Skippy peanut butter business to
Austin, MN-based producer of branded food and meat
Hormel Foods Corporation
). However, the sale of the Chinese manufacturing facility is yet
to get regulatory approval and is expected to close by the end of
The two companies agreed on the deal on Jan 3, where Unilever
decided to sell its global Skippy businesses and two
manufacturing facilities (in U.S. and China) for $700 million in
Introduced in 1932, Skippy holds the second largest market
share in the U.S. for natural peanut butter category, after
The J.M. Smucker Co
)'s Jif, according to market researcher Euromonitor
International. The total annual sale from Skippy is estimated to
be $370 million out of which $100 million is expected from
countries outside the U.S.
Unilever has divested the business as a result of a decline in
revenues from its foods segment. The company is eager to focus
more on the other segments where profitability is higher. On the
other hand, the move is seen as an initiative by Hormel to expand
its product portfolio in view of increasing raw material costs
and reduction in demand of its core products like meat. The
decline of consumption of pork and beef has been driven in recent
years by higher prices, an uncertain economy and health-related
concerns. The cost of grains that are fed to livestock has also
risen, inflating the company's costs.
Overall, we are optimistic about Unilever's wide portfolio of
brands, which helps it to maintain a dominant share in the
market. Unilever has been strengthening its portfolio by
expanding through a number of acquisitions. Further, Unilever has
been divesting its businesses to shed off its non-core
operations, thereby optimizing resources and allocating them to
more promising markets. In Aug 2012,
ConAgra Foods Inc.
) bought its Bertolli and P.F. Chang's frozen meals brands for
However, the company faces high commodity and raw material
cost that is impacting its margins since last many quarters.
Moreover, we continue to expect an uncertain macro-economic
environment, going forward. Though the company forecasts volume
gains and strong free cash flow in the near term, commodity cost
inflation will continue to be a headwind. Unilever currently
holds a Zacks Rank #4 (Sell).
CONAGRA FOODS (CAG): Free Stock Analysis
HORMEL FOODS CP (HRL): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
UNILEVER PLC (UL): Free Stock Analysis Report
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