Unilever Abandons Food Business in Bid to Boost Valuation

Unilever is on a mission to prove that less is more. The British consumer goods giant has been shedding its food assets in an effort to boost growth and close the valuation gap with rivals like Procter & Gamble, L'Oreal, and Coca-Cola.

The company's deal to merge its food business with US spice maker McCormick will leave Unilever with a nearly 10% stake in the combined entity, as well as its shareholders holding roughly 55% of the shares. This reduction in exposure to high-margin food businesses increases pressure on management to show that faster-growing beauty, personal care, and home products can make up for the difference.

'Until you show me the evidence that you're turning this around, you're sitting on a very low multiple,' said Dan Hanbury, portfolio manager at Ninety One. Unilever needs to deliver three or four quarters of strong volume growth to win over doubters, he added.