Unilever Will Acquire Condiment Upstart After Spurning Kraft

(Bloomberg) -- Unilever, which rebuffed a $143 billion takeover proposal from Kraft Heinz Co. earlier this year, is betting that condiments can help re-energize its business.

The household-product giant, whose portfolio includes Hellmann’s mayonnaise and Ben & Jerry’s ice cream, agreed to buy Sir Kensington’s, an upstart food company that makes natural and non-GMO ketchup and eggless mayo. The price was about $140 million, people familiar with the transaction said.

The European company has acquired other young brands in the past, aiming to freshen its image and move into faster-growing markets. Last year, it bought Seventh Generation Inc., a Vermont-based maker of natural and environmentally conscious cleaning products. The deal was announced about two months after Unilever acquired Dollar Shave Club, a subscription toiletry-delivery business that’s popular with millennials.

With the latest deal, Unilever hopes to bolster its reputation for sustainable products. Sir Kensington’s vegan mayo is made from aquafaba, an ingredient that’s caught on with consumers switching to more eco-friendly foods.

“Their mission to bring ‘integrity and charm to ordinary and overlooked food’ is very much in line with our Unilever Sustainable Living Plan,” said Kees Kruythoff, president of the company’s North American business.

Eggless mayo is still a small segment of the $1.4 billion U.S. mayonnaise market, though it’s expanding rapidly. In the last year, sales surged 20 percent to $20.6 million, according to Nielsen.

Unilever Chief Executive Officer Paul Polman announced an overhaul of the company this month, following the rejected acquisition attempt by Kraft Heinz. As part of the shake-up, Unilever is putting its margarine business up for sale and trying to boost shareholder returns via buybacks and higher profitability goals. Polman acknowledged he was caught off guard by the approach from Kraft Heinz, which is controlled by the private equity firm 3G Capital and Warren Buffett’s Berkshire Hathaway Inc.

Unilever shares rose Thursday in Amsterdam after the company posted quarterly sales that beat estimates. But its personal-care unit fueled most of the growth, not Unilever’s food division. The company has been hampered by lower consumer prices in Europe and a slowdown in emerging markets such as China and India.

Food Slump

Unilever is struggling with a broader slowdown that has weighed on food and consumer-product giants on both sides of the Atlantic. In a bid to drum up $3 billion in sales over the next 10 years, the company is expanding distribution of its products in major cities, including in Sir Kensington’s hometown of New York.

Sir Kensington’s, founded in 2010, sells its products in Whole Foods Market Inc. locations and other retailers. The acquisition means Unilever now owns a rival to Hampton Creek, the eggless mayo company it sued over the labeling of a product called Just Mayo.

The transaction is slated to be completed in the next few weeks, and Sir Kensington’s co-founders Mark Ramadan and Scott Norton will remain at the business.

Sir Kensington’s first met executives from Unilever last November, and the deal talks got more serious about two months ago, Norton said in an interview. He was encouraged by how Unilever reacted to the approach from Kraft Heinz: rejecting the deal because it would threaten its culture. That gave Sir Kensington’s more confidence that Unilever would make a good corporate parent, Norton said.

“It was a great porthole to learn about how they do business,” he said.

--With assistance from Thomas Buckley and Jennifer Kaplan

To contact the reporters on this story: Olivia Zaleski in San Francisco at ozaleski@bloomberg.net, Craig Giammona in New York at cgiammona@bloomberg.net.

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net.