Unilever explores options for European frozen foods
into "strategic options" for its frozen food operations in Europe,
many analysts are speculating about who might have thecash to grab
the whole or parts of the various brands involved.
But Unilever's options could also more reinvestment in the operations under review or even creating a spinoff company, thus keeping its famous brands out of the hands of competitors.
Consumers have generally been turning toward natural, organic and chilled fresh foods rather than to the convenience that frozen foods offer, according to analysts.
Last month Heinz also said its European results were pulled down by poorly performing seafood and frozen foods sales. Heinz is also looking into whether the units, which the company describes as "non-core", should be offloaded.
The Unilever announcement comes as the company 's management failed in their five year programme to meet their forecast of six per cent sales growth by 2004. Sales only grew by 0.9 per cent lastyear. During the period the company cut about 1,200 under performing brands.
This year the company has refrained from making predictions. In February, chief executive Patrick Cescau said his priority was to return the business to growth through improving competitivenessmarketplace and reverse the market share losses suffered by the Anglo-Dutch conglomerate during the latter half of 2003 and through 2004.
Unilever's frozen foods division trades in 11 European countries, and includes brands such as Birds Eye, Findus and Iglo. Various news publications had previous reported that the company hadappointed investment bank Goldman Sachs to look at the options for the division.
On Friday the company confirmed a review was underway.
"The frozen foods business has created considerable value for shareholders for a number of years," the company stated in a press release. "It has now been decided toinvestigate how best to maintain this for the future."
The division generated sales of €2bn in the last financial year, but Unilever said at its second quarter results earlier this year that business had been disappointing. Ice creams and frozenfoods make up about 30 per cent of Unilever sales.
Turnover rose by 3.1 per cent in the second quarter this year, compared to the same quarter in 2004. After accounting for exchange rate, disposals and acquisitions, the division generated five percent growth, an operating profit of about 17 per cent and a margin of about 14 per cent.
"Sales in western Europe were disappointing in a challenging environment, particularly in the UK, France and the Netherlands, and by category in home and personal care and in frozen foods,"the company stated. "We expect to see a gradual improvement resulting from a step-up in activity and innovation."
The company is suffering in its main European market, in which sales fell by 0.6 per cent in the second quarter, compared to a two per cent decline in the first quarter this year.
The food sector accounts for 49 per cent of the Anglo-Dutch group's sales, drinks eight per cent and home and personal care for the rest. As the largest consumers products group in the world thecompany had a turnover of €39.1bn in 2004. Europe accounts for 43 per cent of sales and the US 32 per cent. Asia and Africa accounts for 25 per cent of turnover.
Analysts suggest that likely bidders for the European frozen foods operations include Hicks Muse Tate & Furst, Texas Pacific, Candover and Bridgepoint Capital.
