Kraft Heinz’s Bid for Unilever Shows Processed Food Industry’s Appetite for Change

Kraft Heinz’s Bid for Unilever Shows Processed Food Industry’s Appetite for Change

Unilever declined a takeover offer of over $140 billion from Kraft Heinz, stating that the offer “fundamentally undervalues” the company. The rebuff prompted Kraft Heinz to withdraw the offer, but speculation continues that the company may be hungry for another merger. Combining forces with another major food manufacturer would vault Kraft Heinz closer to the top of its industry, making it a more formidable rival to Conagra Brands and Nestlé in the race to capture share in the growing US market for processed foods.

The US Market for Processed Foods is Wide Open

According to Processed Foods: United States, a report recently published by Freedonia Focus Reports, US shipments of processed foods are forecast to reach $808 billion in 2021. The industry stands to benefit from growth in population and disposable personal income. In addition, the convenience associated with many processed foods appeals to consumers with busy lifestyles and the growing number of single-person households.

While processed food companies hope to realize organic growth due to these trends, the relatively low concentration within the industry offers the tantalizing possibility of growth by acquisition as well. According to the US Census Bureau, in 2012 (the latest Census year), the top four firms in the US processed foods industry accounted for just 16% of shipments.

Processed Food Industry Presents a Menu of Acquisition Targets

A merger with Unilever would have added a number of major food brands to Kraft Heinz’s already extensive portfolio, and made the company a powerhouse in some segments of the market. One of these segments is dressings and sauces, the leading type of canned food in the US by shipments value. Kraft Heinz produces Heinz, one of the top brands of ketchup and other tomato-based condiments, and Unilever produces Hellmann’s, a leading brand of mayonnaise.

While the failed bid for Unilever may deny Kraft Heinz the opportunity to become the king of condiments, the processed food industry presents a menu of other targets. Acquisition of General Mills (maker of Yoplait yogurt), for example, would expand Kraft’s exposure to the dairy products segment of the industry, which is forecast to post above-average growth through 2021. Another option is Mondelēz International, a leading player in the sugar and confectionery segment, which is expected to reach $40.4 billion in shipments by 2021.

Want to Learn More?

Freedonia Focus Reports, a division of The Freedonia Group, recently published two reports covering the US food industry: Processed Foods: United States and Canned Foods: United States.

Processed Foods: United States forecasts US processed food shipments in US dollars at the manufacturers’ level to 2021. Total shipments are segmented by product in terms of:

  • meat, poultry, and seafood
  • grains and oilseeds
  • dairy products
  • bakery and related products
  • animal food
  • processed fruits and vegetables
  • sugar and confectionery products
  • other products such as frozen specialties and roasted nuts.

Canned Foods: United States forecasts US canned food shipments in US dollars at the manufacturers’ level to 2021. Total shipments are segmented by product in terms of:

  • dressings and sauces
  • fruits and vegetables
  • dog and cat food
  • meat, poultry, and seafood
  • soups and stews
  • other products such as canned baby food and peanut butter.

These reports discuss market drivers and constraints, and profile leading companies in the processed and canned food industries.

Our menu of market research reports also includes other food- and beverage-related topics such as:

About the Author

Erica Keenan is a Research Analyst with The Freedonia Group. She holds degrees in biomedical science and a certificate in data science, and her experience as an analyst spans multiple industries.