Kraft Heinz and Unilever, ketchup and mayonnaise merger fades

Kraft Heinz and Unilever have recently held talks on a mega-merger of their food brands that would bring together Heinz ketchup and Calvé mayonnaise, as well as Hellmann's mayonnaise, under one roof, as the two food giants battle to restructure their portfolios to meet market demand.

This was revealed by the Financial Times, according to which discussions between the two groups in recent months, which have now been concluded, centred on a merger between Unilever's food business and Kraft Heinz's condiments division. A deal would have created a new entity worth tens of billions of dollars.

The possibility of a merger underlines how difficult it is for Kraft Heinz and Unilever to cope with declining demand from increasingly health-conscious consumers, who are shifting their spending away from packaged food brands. Over the past decade, Unilever has gradually moved away from the food sector and towards beauty and personal care brands. The London-listed group, which still owns Knorr and the iconic British sauce Marmite, has divested its spreads, tea and frozen food divisions.

Unilever's new CEO, Fernando Fernández, has not ruled out the possibility of divesting the Anglo-Dutch company's entire food business. Analysts at Jefferies, according to Ft, estimate the value of Unilever's food business as a stand-alone entity at around USD 37 billion. Kraft Heinz, which went through a difficult period after the merger put in place by Warren Buffett and 3G Capital a decade ago, is also in the midst of a strategy change.

The talks with Unilever took place prior to the US company's decision in February to suspend the planned demerger and commit to invest $600 million in a relaunch plan under the leadership of CEO Steve Cahillane, who took office in January.