Unilever Drops Ragu And Bertolli Brands
By Karla Paris
In an effort to deliver sustainable growth, the company is selling its North American pasta sauces, sharpening its focus on food-manufacturing
Unilever announced today it signed an agreement for the sale of its North America pasta sauces business under the Ragu and Bertolli brands. The Mizkan Group of Japan will purchase the company for a total cash consideration of approximately $2.15 billion. The annual turnover for Ragu and Bertolli is more than $600 million. The deal — which is anticipated to complete in June — includes a sauce processing and packaging facility in Owensboro, KY, and a tomato-processing facility in Stockton, CA. Unilever retained the right to sell Ragu and Bertolli in Europe.
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The rise of private label food brands has been a major factor negatively affecting Unilever. Private label food brands are becoming more prominent in the U.S. as they are priced lower than branded food products due to operational efficiency. Private label, store-brand packaged goods account for nearly $109 billion in revenue within the U.S. market each year. Additionally, sales of store-brand products, primarily in food categories such as dairy products, have outpaced the sales of food manufacturers’ brands, generating gross margins of more than 35 percent.
Unilever’s pasta sauce sales in the U.S. have declined by nearly 6 percent in the past two years. In line with this trend, Ragu’s sales have fallen by 18 percent since 2009. Unilever has been shopping its Ragu and Bertolli pasta sauce brand as the company is working to reestablish its food portfolio. In the company’s announcement, Kees Kruythoff, president of Unilever North America commented on the sale noting “this sale represents one of the final steps in reshaping our portfolio in North America to deliver sustainable growth for Unilever, and enables us to sharpen our focus within our foods business.”
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After releasing its first-quarter financial results for 2014 on April 24, which illustrated a near 2 percent decline in food sales growth and a 2 percent decline in volume growth for the same period, it is easy to see why Unilever is trying to trim its losses.