McCormick's $45 billion "acquisition" of Unilever's food business: McDonald's ketchup and Knorr soup cubes have become one family

Ask AI · How will the merger reshape the competitive landscape of China’s ketchup market?

Image source: Visual China

Blue Whale News, April 1 (Reporter Dai Ziting) Kraft Homestyle Soup and Hellimener mayonnaise are about to become “family” with Heinz ketchup.

Heinz is the American condiment giant behind that red-lidded bottle, whose name is so strongly associated with “Chinese flavor” that consumers often mistake it for a domestic brand. Its products—from pepper and chili powder in the kitchen to ketchup that’s a must-have on McDonald’s fries—have long been deeply embedded in everyday life.

Recently, Heinz directly “acquired” Unilever’s food business. On March 31, Unilever and Heinz jointly announced they had reached a final agreement: Heinz will acquire most of Unilever’s food business through a “cash + equity” deal. The transaction is valued at nearly $45 billion (about RMB 326 billion). After the merger, the new company’s annual revenue will exceed $20 billion (about RMB 145 billion). Unilever and its shareholders will hold 65% of the new company’s shares, while Heinz’s original shareholders will hold 35%.

Analysts told Blue Whale News that the most direct impact of this merger on China’s condiment market is not in the MSG or spice segments, but rather in the ketchup and sauce market, where domestic and international brands such as Heinz, Lee Kum Kee, and Huatian may face direct challenges.

Details of the $45 billion deal: cash + equity, Reverse Morris Trust structure

According to the transaction arrangements disclosed by both parties, Heinz will acquire most of Unilever’s food assets through a “cash + equity” combination. The overall transaction valuation is locked at nearly $45 billion, which is equivalent to 13.8 times the 2025 fiscal year EBITDA (earnings before interest, taxes, depreciation, and amortization) of this business.

Specifically, the consideration is split into two parts: Heinz will pay $15.7 billion in cash directly, providing Unilever with an immediate cash flow boost; Unilever and its existing shareholders will receive 65% of the shares in the new company after the merger. Of this, Unilever itself will hold 9.9%, its shareholders will hold 55.1%, and Heinz’s original shareholders will hold 35%.

In other words, if the transaction is completed as planned, Heinz will retain the listed entity, the company name, and management control. But from the perspective of economic interest allocation, the Unilever camp will hold a majority stake in the merged company. The announcement shows that the parties expect the transaction to be completed in mid-2027. Closing conditions include obtaining Heinz shareholder approval, approval from relevant regulators, and meeting other customary closing conditions.

It is worth noting that this deal uses a “Reverse Morris Trust” structure, which enables a tax-free merger and significantly reduces transaction costs for both parties. According to The Wall Street Journal, under U.S. tax law, this structure allows a company to spin off assets and merge with another company, thereby avoiding federal income tax.

Among the acquired assets are many brands well known to consumers—including the globally recognized Hellimener mayonnaise, the UK’s popular brand Mamem sauce, Europe’s best-selling Coleman mustard, and Kraft Homestyle Soup. The deal explicitly excludes Unilever’s food businesses in India, Nepal, and Portugal, as well as its lifestyle and nutrition business and its Lipton ready-to-drink tea business.

Unilever continues to move forward with divesting the food segment

For Unilever, this transaction is a continuation of its “leaning down” strategy. After it divested its tea business and spun off its ice cream business, Unilever is now further separating out its food segment.

According to Unilever’s 2025 financial report, full-year revenue declined 3.8% year over year to €50.5 billion. Food business revenue was €12.9 billion (about RMB 105.8 billion), accounting for 26% of group revenue, and underlying operating profit was €2.9 billion (about RMB 23.8 billion). From a growth perspective, underlying sales for the food business grew 2.5%, but the underlying volume growth rate was only 0.8%, ranking last across all business segments.

Looking at the specific business composition, Unilever’s food business has three core areas: Unilever Food Solutions, cooking auxiliary products, and condiments. In 2025, Unilever Food Solutions sales were basically flat; cooking auxiliary products recorded low growth in the low single digits; condiments achieved mid-single-digit growth, with Hellimener continuing its growth momentum. Based on the group’s revenue mix, in 2025 cooking auxiliary products and condiments accounted for 12% and 8% of Unilever Group revenue, respectively.

In China, in 2025 Unilever’s China business underlying sales were flat. The fourth quarter improved somewhat, but the food business continued to be affected by a decline in catering foot traffic. According to Xiaoshidai, China ranks among the top five markets for Unilever’s food business. In 2024, the revenue share was 5%, which implies about RMB 5.6 billion.

In the future, Unilever may want to concentrate group resources on the personal care and home care cleaning segments, which have higher growth and higher profit margins. In its announcement, Unilever said plainly that after the transaction closes, it will become a more pure-play HPC company—one that focuses more on beauty and health, personal care, and home care. Based on its disclosed 2025 financial report, after divesting the food business, Unilever will keep business revenue of roughly €39 billion.

Heinz: From the “spice king” to a full-range condiment company

On the other hand, for Heinz, this deal looks more like an obvious expansion of its “category map.” In an announcement released on March 31, Heinz said the merged company will form a more complete portfolio covering herb and spice seasonings, seasoning blends, cooking auxiliary products, sauces, and table seasonings.

Heinz’s FY2025 financial report shows that its full-year net sales reached $6.84 billion (about RMB 471 billion), up 1.7% year over year; operating profit was about $1.07 billion (about RMB 73.85 billion), up 1% year over year. Gross margin fell 0.6 percentage points year over year to 37.9%, the lowest level in recent years. If calculated based on the FY2025 annual report, after merging with Unilever’s food business, the company’s revenue scale will reach about $20 billion.

In terms of business segments, Heinz’s two main business performances show a clear divergence. Its business-to-business flavor solutions division drives profit growth: full-year operating profit rose 9.0% year over year, mainly supported by orders from major customers such as Pepsi and McDonald’s. Meanwhile, its consumer-facing B2C business finds itself in a “growing revenue but not growing profits” predicament: full-year operating profit fell 0.7% year over year. Notably, Heinz is highly dependent on major customers. In 2025, Pepsi and Walmart together contributed about RMB 5.7 billion in sales, accounting for 24% of annual sales.

In addition, Heinz’s growth in FY2025 depends largely on the performance of the China market. The financial report shows that in the Asia-Pacific region, sales for the flavor solutions division grew 6.2% year over year. The company explicitly emphasized that this growth was “entirely driven by the China market.” However, behind this growth is a “trading price for volume” strategy used to capture market share: in this region, sales volume and product mix contributed 8.6% to growth, while product prices fell 1.9%.

For Heinz, which has long been known for spices, seasoning blends, and B2B flavor solutions, the brands brought in by Unilever—Kraft Homestyle Soup, Hellimener, and Maille—will undoubtedly strengthen its weak spots in sauces and cooking auxiliary products.

Regarding the impact of this merger on China’s market, Zhang Ji, a specially appointed research fellow at the China Condiment Industry Data Center, told Blue Whale News that from the perspective of category and channel structure, this deal will not trigger dramatic changes across all sub-segments at the same time. The core variable truly worth watching may be the sub-markets such as ketchup, tomato sauce, and related categories.

In his view, the advantages of Unilever’s Hellimener in the China market are more reflected in Chinese catering scenarios and its B2B channel network. Meanwhile, Heinz has built a deeper foundation among spices, Western-style seasonings, and customers of Western chain restaurants, especially in categories such as ketchup and tomato sauce. If the two sides integrate smoothly, Heinz’s original product advantages in both the B2B and retail channels could further go deeper by leveraging Hellimener’s channel capabilities in small and medium-sized foodservice outlets. Ketchup and sauce categories may become the breakthrough point for releasing synergy effects first in the China market.

Zhang Ji believes that if the subsequent integration goes well, sub-segments such as ketchup and sauces may feel the impact first. He pointed out that Heinz currently has direct competition with Hellimener in both the C-side and parts of the B-side markets; if Heinz leverages Hellimener’s channels to further penetrate the foodservice end, the competitive pressure faced by Heinz in those markets may increase. At the same time, local condiment companies such as Lee Kum Kee and Huatian have also been actively building up ketchup, sauce, and other categories in recent years. Relying on their existing channel networks and brand foundations, they hold certain advantages in the mid-to-low-end market. If Heinz manages to consolidate its high-end image on the C-side while accelerating B2B expansion with Hellimener, the competitive landscape in those markets may become even more intense.

Over a longer cycle, the message this deal sends to domestic condiment companies is that competition in the future may no longer be only competition between individual products; it will increasingly become comprehensive competition involving product portfolios, channel coverage, and foodservice service capabilities. For domestic companies, how to provide more complete solutions centered on end-user scenarios may become even more important.