The trend: Unilever is the latest consumer packaged goods (CPG) company to unwind its sprawling structure.

The company is in discussions to sell its food division to McCormick in an all-stock deal, according to The Wall Street Journal and Bloomberg. The division includes “must-have” brands such as Hellmann’s mayonnaise and Knorr stock cubes.

The talks mark a sharp escalation from earlier plans to divest smaller brands and follow abandoned negotiations with Kraft Heinz.

The context: The deal would accelerate Unilever’s multiyear effort to focus on higher-growth categories with stronger pricing power and greater scope for innovation.

• The company has steadily shed assets, including its global spreads division in 2018, its tea business in 2022, and snack brand Graze and plant-based meat brand The Vegetarian Butcher last year, around the same time it spun off its ice cream unit into Magnum Ice Cream Co.
• A full exit from food would be the most decisive step yet.

Unilever’s food division grew sales 2.5% YoY last year to €12.9 billion ($14.88 billion) and its operating margin expanded to 21.3% from 19.5%, setting it apart from many CPG peers. However, the category faces mounting pressure from private labels, rising price sensitivity, and shifting health behaviors, including GLP-1-driven consumption changes. Food has become a smaller part of the company’s business—accounting for 26% of global turnover last year, down from 38%—as Unilever shifts its focus toward beauty and personal care, where growth potential is higher.

The other side of the deal: For McCormick, the deal would deepen its focus on condiments and cooking enhancements, while adding Hellmann’s and Knorr to a portfolio that includes Cholula hot sauce, French’s mustard, and Frank’s RedHot sauce. Those kinds of marquee assets are valuable as price-sensitive consumers trade down to private labels and eating habits evolve. While 62% of US consumers trust private label quality, many will still balk at a private label mayonnaise or stock cube.

However, the scale of the deal is worth noting given that McCormick’s market cap is about $14.5 billion, which means it will encounter some of the same challenges that face a snake trying to eat a deer: Even if it succeeds, digesting a deal of this size could take time and bring meaningful integration challenges.

Implications for brands: If completed, the deal would be the latest example of a large CPG shedding slower-growth categories while doubling down on areas where it can win.

That dynamic is accelerating a divide within food. On one side are “must-have” brands with entrenched consumer loyalty and real pricing power. On the other are increasingly commoditized products, vulnerable to private labels and shifting consumption habits.

In a tough macro environment, companies are following growth, which increasingly means concentrating resources behind the few brands that can still deliver it.