Unilever’s recent acquisition of Graze, the UK’s leading healthy snacking brand, comes at an important time for the company as a wider entry point into the global snacks market.
Unilever is the world’s sixth largest packaged food company, holding a 1.2% value share of the global market. Unilever has traditionally concentrated its presence in food to a few products. Ice cream, for example, accounts for 52% of the company’s total food and drinks sales thanks to the success of its billion-dollar brands, Magnum and Wall’s.
The company has historically lacked a compelling snack offering in traditional snacking categories such as snack bars and savoury snacks which have been amongst the top fastest growing products in food over the last 5 years. The company already started to explore this space with the launch of savoury snacks brand Growing Roots in 2018 in the US but still lacks presence in Western Europe.
Unilever’s strong presence in Europe and increasing penetration in the US where online retail is outpacing the growth of traditional grocery channels will help to scale the brand quickly. The company has already successfully done this with its acquisition of Dollar Shave Club through in 2016 that continues to show double-digit value growth in North America and Europe.
The move also continues Unilever’s aim of expanding its digital presence in food retail following investments in subscription meal kits like Gousto in the UK and in Sun Basket in the US in 2017 and new partnerships with food delivery platforms such as Just Eat and Uber Eats to offer on-demand ice cream.
“This acquisition will not come without its challenges. Entering the savoury snacking segment will come with expensive additional set-up costs as the company looks to scale up in a new product market. Strong competition on the e-commerce front from existing subscription schemes and e-commerce giants like Amazon and Ocado could limit growth potential.”
-Trishna Shah, Senior Food & Nutrition Analyst
Though Graze’s notable presence in the U.K. made up 4% of the nuts, seeds, and trail mixes market last year, sales have slowed down more recently signaling a declining interest in the brand and signs of a brand that may be struggling against increasing competition and the high running costs of delivery schemes. In any case, all eyes will be on Unilever and its new CEO Alan Jope as it takes its first significant step in re-structuring its snacking portfolio.
For a more detailed strategic analysis of Unilever Group's performance in the packaged food market and global economy, see our full report.