Kraft Heinz confirms Unilever merger ambition

Unilever Kraft Heinz

The Kraft Heinz company has confirmed its pursuit of a merger with Unilever, a move that has been initially rejected but would create a consumer goods giant encapsulating many of the world’s top brands should it go ahead.

The company has revealed that the proposed merger was shot down, resulting in stock to rise in both firms, with Kraft Heinz up 4.33% and Unilever up 9.74% at the time of publication.

The Financial Times reports that the deal would be one of the largest in history, valued at £112bn. Furthermore, the merger would have far-reaching implications for marketers with the combined business likely to have to sell off brands to avoid anti-competitive issues.

Kraft Heinz announced it “has made a comprehensive proposal to Unilever about combining the two groups to create a leading consumer goods company with a mission of long-term growth and sustainable living”.

It comes after Heinz and Kraft merged in 2015 forming the US’ third largest food manufacturing company.

The news shook the shares of Campbell Soup, Hershey and General Mills, all of whom dropped in early trading in reaction, following the failed merger.

Speaking earlier this week while opening the company's first co-working space, Paul Polman, Unilever's chief executive, stated: "Companies like ours, traditional companies, have to continually reinvent ourselves. We would get away with making changes over a five or 10 year period but if you don’t implement them now within a six or 12 month period, you are probably toast. Continually looking how we drive our relevance and innovation capabilities higher is the most important thing we do."

Raphael Moreau, food analyst at Euromonitor International, said: “Although there was little incentive for Unilever to accept this initial merger offer, Kraft Heinz and 3G Capital’s willingness to pursue a deal could ultimately encourage Unilever to seek a deal to offload some of its food brands, to which Kraft Heinz would seek to apply aggressive cost reductions. While creating synergies in sauces and soups could be a rational for such a deal, a combination of Heinz and Hellmann in mayonnaise could struggle to be given approval by competition authorities. Its search for a mega-merger could see 3G Capital settle for a smaller deal under which group synergies would be more achievable.”

The merger could have major ramifications for the marketing sector as a whole, not least the agency networks. Aside from the individual brands owned by both companies which account for thousands of agency relationships, the corporate businesses also employ many agencies themselves. According to ALF, Kraft Heinz works with agencies such as BBH, OMD, CHI & Partners and Mercieca. Meanwhile it reports that Unilever Plc employs Mindshare, the Engine Group, SapientRazorfish and Oliver Marketing among another list of suppliers.

Get the Newsletter

Keep up to date with the latest news and insights.

Subscribe

John McCarthy

John is an entertainment marketing reporter at The Drum. He writes about the amazing marketing stories coming from the movie, TV, music and video game industries. He's also the hunt for the weirder trends in marketing and advertising.

Fuelled by tea.

All by John