Unilever's sale to McCormick is about more than just mayo

A multi-billion-dollar deal rocked the grocery industry on Tuesday.

Unilever, a grocery giant that owns everything from Hellmann’s mayonnaise to Dove soap, just sold off its food business. The buyer? McCormick & Company, the spices and sauces company.

Unilever has been selling off its food brands for a little while now. It got rid of its ice cream holdings late last year, including Ben & Jerry’s. It’s the latest in a recent trend of giant conglomerates spinning off, selling off, and acquiring the familiar brands in the middle aisles of the grocery store.

The move of consolidating and simplifying in the grocery industry has been going on for years now. Remember — Procter & Gamble, the personal care brand, used to own Pringles and Folgers coffee.

“It’s much more difficult to have a company that is focusing on both foods and nonfoods,” said Russell Zwanka, who directs the food marketing program at Western Michigan University.

Selling off the food brands makes sense, he said. For instance, soap and mayonnaise are two very different products to sell.

“You can have entirely different strategy for personal care and home care, because… you're ingesting the product, as opposed to applying it topically or cleaning your clothes,” Zwanka said.

If Unilever was going to drop one, the food side just isn’t growing much. Part of the reason is a change in consumer buying, said Ricky Volpe, an agribusiness professor at Cal Poly San Luis Obispo.

“Folks have been increasingly moving towards more prepared and ready-to-eat foods, the perimeter of the supermarket,” Volpe said.

That means we’re spending more time in the fresh produce and deli sections, and less time buying boxes of stuff. Volpe said there’s another trend.

“With especially younger Americans, we've seen brand loyalty eroded in a big way,” he said.

Consumers still know Hellmann’s mayonnaise, but they’re not committed to buying it — especially if the generic store brand option is $1 cheaper.

So, Volpe said, it’s a good idea for Unilever to get rid of it. But Eric Chaffee, a business law professor at Case Western Reserve University, said it’s also a good idea for McCormick to pick it up.

“This is going to make them more of a player in regard to the food industry, meaning that they're going to be able to provide both spices and condiments at the same time,” Chaffee said.

For McCormick, adding mayonnaise is a pretty natural progression to their spice-and-sauce niche, said Bobby Gibbs, partner at the retail consulting firm Oliver Wyman.

“Because the scale that you’re doing in one of your products, you can actually apply others,” he said.

In the short term, this won’t change much for consumers. But Volpe said as more brands consolidate power in their corner of the market, they also have an easier time raising their prices.