Who will buy Lawryâs seasonings brand from Unilever ?
- September 13, 2007
||second round of tender process for business unit and brand divestment;
||Lawryâs (USA), regional sauces and seasonings brand in the US;
||candidates include Heinz, McCormick, ABF and Pinnacle Foods;
||Unilever (UK /Holland), multinational FMCG group;
||high âmargin addition to culinary portfolio;
||portfolio restructuring, exit from non -core businesses;
||Pinnacle was acquired earlier this year by Blackstone private equity, in a secondary buy-out.
This pending deal is part of flurry of portfolio âtrimmingâ divestments at Unilever now; businesses and brands that are too small to justify further investment. Also interesting is the line-up of potential acquirors; if Pinnacle emerges as the winner, which we believe it should from a strategic rationale perspective, then a strong signal will be sent that private equity is still a force to be reckoned with, in spite of difficult debt markets.
Pinnacle was acquired earlier this year by Blackstone, in a secondary buy-out. Although the price they paid was quite reasonable, the value âcreation âthrough ârestructuring work had largely been done already, by Blackstoneâs predecessors; for that reason itâs important for Pinnacle to now make new acquisitions, to create further synergies and top âline growth opportunities, if Blackstone is also to multiply its money. As a $ 150 mln turnover business, Lawryâs is big enough to provide that.
Whatâs more, Lawryâs would complement Pinnacleâs portfolio very nicely. The group is relatively weak in âseasoningsâ (wet or dry), where itâs represented by its Open Pit sauce business which is only a regional brand, in Americaâs Mid-West. Pinnacleâs portfolio overall is more heavily weighted in foods; Lawry provides it with an opportunity to expand further into âfood accessoriesâ â culinary products generally deliver higher brand loyalty and margins than foods do.
On top of that, we donât think Lawryâs is as much of a âmust haveâ for the other cited bidders, as it is for Pinnacle. Heinz is not interested in âdryâ seasonings, which are at the core of Lawryâs portfolio; besides, the sauces part of Lawryâs is probably just too small to animate the group sufficiently. McCormickâs 250 brands have 40-60% of the US market for sauces and seasonings. Lawryâs would give it yet another brand, and 10% more sales revenue; is that really worth the marketing focus dilemmas ? As for ABF, itâs true that theyâre no. 2 in the US market for herbs and spices, by virtue of their 2004 acqusition of the Turkee, Toneâs and Spice Islands brands from Burns Phelp. But these were the lesser part of a package where the main attraction was an international yeast and bakery ingredients business much closer to ABFâs core. The group has no international brands or ambitions in sauces and seasonings; we donât think theyâll take on a determined US buyer for Lawryâs.
Also on sale currently, in Unileverâs campaign to trim off small businesses, whose loss would not significantly impact its distribution systems, are its non-branded UK food ingredients business, US laundry activities, and its lonely Boursin fresh cheese brand. This reducing down of the portfolio has been going on for many years at Unilever; how many more assets like these are tucked away in the corners of the groupâs website ?