There’s a new kingpin in the condiment aisle.
After weeks of speculation, McCormick & Company said on Tuesday that it planned to combine with Unilever’s food business to form a new entity with some $20 billion in annual revenue.
The deal, which the companies expected to close by the middle of next year, would create a spice-and-sauce giant under the McCormick name. McCormick brings with it a dominant place in the spice aisle, as well as its French’s mustard and Stubb’s barbecue sauce brands. Unilever owns Hellmann’s mayonnaise and Knorr, known for its bullion cubes and seasonings.
The stock-and-cash deal valued Unilever’s food business at nearly $45 billion, including debt. It ends Unilever’s time in the food industry, a business it has been involved in for nearly 100 years. Last year, food made up roughly a quarter of its total revenues.
“Together, we create a focused, global flavor powerhouse, scaled, resilient and uniquely concentrated on flavor,” Brendan Foley, McCormick’s chief executive, said in a call early Tuesday with Wall Street analysts and investors. “We believe this combination strengthens the competitive position of the business,” Fernando Fernández, Unilever’s chief executive, added on the call.
The move is yet another example of the food industry turning to financial wheeling-and-dealing to create a combination of brands or assets that they hope will please investors.
The result has been a hodgepodge of spinoffs, breakups and mergers. In 2023, the cereal giant Kellogg separated into two companies. In 2024, Kellanova, the new snacking side of the business, was acquired by the candy giant Mars in a deal valued at $36 billion. Last year, the Italian candy company Ferrero agreed to acquire WK Kellogg, the cereal business, in a deal valued at $3.1 billion.
This year, executives at Kraft Heinz, which was far on the path to splitting up, changed their minds, deciding to remain a single entity. For now.
The global condiment market has been a bright spot for the food industry in recent years as consumers increasingly seek bold, spicy or tangy sauces and dips for foods. Hellmann’s mayonnaise spinoffs come in flavors like chili-lime, chipotle and spicy ranch.
But that growth has slowed. Consumers, after several consecutive years of price increases, have cut back on their purchases of some spices and sauces.
Now there is even more uncertainty in the global economy as the U.S.-led war with Iran continues, driving oil prices up and raising fuel costs. Those increased expenses could be passed along to consumers, pushing prices higher.
On Tuesday, McCormick reported a 17 percent increase in sales for the first quarter. But nearly all of that growth came from its acquisition in January of McCormick de Mexico. Without that acquisition, sales increased 1 percent, driven entirely by a nearly 2 percent increase in pricing as consumer demand slipped close to 1 percent.
In early trading, McCormick’s stock fell 4 percent to $51.61, while Unilever was down 2.4 percent at $57.49.
On the call with analysts, McCormick’s chief executive said the merger wasn’t being driven by external pressures, such as the slowing global economy.
“I think, obviously, there’s a lot going on in the world right now, so that’s important to kind of keep in mind,” Mr. Foley said. “But I think we’ve always viewed Unilever foods as a great strategic fit.”
After the deal closes, Unilever and its shareholders will own about two-thirds of the new company’s shares, with McCormick’s shareholders holding the rest. The transaction was structured to avoid any federal income tax for Unilever or its shareholders.
Over the last couple of years, the food business at Unilever has lagged the rapid growth in its beauty and personal care divisions, which have seen a resurgence in classic brands like Dove and Vaseline thanks to a strong social media presence.
Unilever was formed in 1929 in a merger of the Dutch margarine company Margarine Unie and the British soap maker Lever Brothers. Over the years, it added big food brands to its portfolio, including Birds Eye frozen vegetables in the 1940s, Breyers ice cream in 1993 and Ben & Jerry’s in 2000.
Unilever’s acquisition of Bestfoods, which housed brands including Knorr and Hellmann’s in 2000 established it as a major, global food company.
Since taking over as Unilever’s chief executive a little more than a year ago, Mr. Fernández has moved quickly to reshape its business.
Late last year, Unilever spun off its holdings in Ben & Jerry’s, Magnum, Breyers and other brands into a separately traded company called The Magnum Ice Cream Company.
Julie Creswell is a business reporter covering the food industry for The Times, writing about all aspects of food, including farming, food inflation, supply-chain disruptions and climate change.
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