THE KRAFT HEINZ CO. was prepared to spend $143 billion—and per- haps even $10 to $15 billion more—to acquire Unilever last month. That is a lot of dough for
a healthy combination of branded tea, mayonnaise, deodorant, ice cream and butter.
The question is why?
The answer, of course, is to gain a larger
foothold in the never-ending battle for shelf
space at supermarkets. It
is a continuation of the
struggle between suppliers and retailers that has
gone on for decades, but
now includes a few little
twists, most importantly
the emergence of digital
giants like Amazon and a
new threat from smaller
suppliers who have
made inroads on food
store shelves themselves.
The merger quickly fell apart when
KraftHeinz officials seemed to realize that
they would have to deal with more than
just another corporate board of directors
and some profit-hungry shareholders.
Unilever is a multinational giant and is supported by the governments of two major
European countries that probably realize
that these types of acquisitions normally
lead to some broken promises and ultimately job cuts that do not play out too
well at election time.
The bottom line is that KraftHeinz officials may have tried to bite off more than
they could chew. Winning over Wall Street
is one thing; beating the governments of
Great Britain and the Netherlands is quite
Regardless, this move shows the stakes
in play among major consumer packaged goods companies as they seek to
gain leverage with retailers. KraftHeinz,
backed by big money—Warren Buffet and
a Brazilian billionaire—is trying to become
the biggest of the CPG fish and is hunting
for slightly smaller companies to increase
its power. Few industry officials doubt that
it will soon turn its attention to another
supplier, perhaps Mondelez, Campbell,
Smuckers or General Mills.
Even with the advent of the Amazon age,
manufacturers are still fighting amongst
themselves and then with retailers to gain
an edge on brick-and-mortar store shelves.
The theory, of course, is that retailers will
not be able to ignore a company that is sim-
ply too large and dominating. Let’s be frank,
the clear loser in this equation will be the
smaller suppliers, who will lose vital shelf
space at the whim of the larger player that
has name recognition, broad distribution,
and, most importantly, a huge marketing
budget to sway the merchant. More space
for their products in the right spots means
more sales. More sales means more profits
and that ends up with happy shareholders.
So KraftHeinz’s attempt to take over
Unilever is simply one more try to get larger
and to diversify a bit into other categories.
Unilever sells personal care products such
as the Dove brand as well as some well-known food brands as Hellmann’s mayonnaise and Lipton tea.
Welcome to the world of 21st Century
supermarket retailing. As never before,
retailers and suppliers are sparring for a
control of this industry, each knowing that
whoever rules the roost will make the most
Do not expect this battle to end anytime
soon. Stay tuned.
KraftHeinz’s attempt to acquire Unilever, though unsuccessful, could be a harbinger of things to come.
By Seth Mendelson
FROM THE PUBLISHER
Seth Mendelson is publisher
and editorial director of Grocery
000 03 Multipet1.prep.indd 1 2/23/17 11: 29 AM