Weihao Mei’s “Snake Swallowing an Elephant” move—acquiring Unilever’s food business—will create a $20 billion annual-revenue condiment giant. How will this reshape the landscape of China’s market?

The Daily Economic News Reporter: Fan Qianqian The Daily Economic News Editor: Xu Shaohang

Unilever, this fast-moving consumer goods giant, is rapidly slimming down. It recently spun off and listed its ice cream business, completing the world’s largest ice cream IPO (initial public offering). Recently, it announced it will spin off its food business (excluding India and other excluded markets) and merge it with a leading player in the condiment field to create a food giant with annual revenue exceeding $20 billion. This deal was officially announced at the end of Q1 and is expected to be completed by mid-next year.

“This move will achieve two clear goals: first, to make Unilever’s business structure more focused; second, to create a new global leader in seasonings,” said Fernando Fernandez, CEO of Unilever, during a conference call on March 31. “This merger will enable an end-to-end leading layout across all categories of seasonings, covering vanilla spices, concentrated soup bases, mayonnaise, mustard, chili sauces, etc., with channels spanning retail and foodservice markets, and markets covering both mature and core emerging markets.”

Behind the birth of this new giant, one is “flavor leader” McCormick, which holds a dominant position in offline retail markets with its diverse product portfolio including pepper and ketchup; the other is Unilever, which has deep expertise in seasonings and foodservice solutions and owns flagship products like Hellmann’s mayonnaise.

(Image source: McCormick official website)

On March 31, during two conference calls, executives from Unilever and McCormick repeatedly painted a future blueprint of “integrating two high-quality complementary companies to unlock significant growth opportunities,” but the capital markets seemed unconvinced. Analysts kept asking, “Why spin off the food business?” and “Where will the stable cash flow lost come from?” Other brands in the seasoning industry may also be worried about how the emergence of this giant will shake up the market landscape.

One drops nearly 10%, the other over 7%, what are the market concerns?

On March 31, local time, shares of Unilever and McCormick fell. Unilever’s stock dropped over 7% intraday, and McCormick’s nearly 10%. On April 1, McCormick’s stock continued to decline, closing down over 4%. This indicates that the capital market has many concerns about this merger and the birth of this seasoning giant.

The Daily Economic News analyzed that there are several reasons behind this. First, Unilever’s food business has strong profitability and high cash conversion efficiency. Previously, Unilever emphasized that there was no need to spin off its food business, but now it is taking the opposite path. This issue was also raised by multiple analysts during the conference call.

In response, Fernando Fernandez emphasized: “The food business is an excellent business. We are not spinning it off because we deny its value; quite the opposite, it is a business we are proud of.” The strategic shift was driven by the fact that the beauty and personal care segments have been elevated to “absolute core” status, making “divestment an inevitable choice.”

“This cooperation was initiated proactively by McCormick, and the timing of this proposal aligns perfectly with our accelerated strategy to focus on beauty and personal care pure categories,” he said. “The main reason we chose to merge with McCormick is that both companies’ businesses have many synergies and complementarities, with very low overlap.”

(Image source: McCormick official website)

Industry expert Chen Xiaolong believes that this merger of Unilever’s food business with McCormick is not simply about increasing scale but about restructuring a more complete “global flavor platform.” McCormick will strengthen its capabilities in sauces, foodservice, emerging market distribution, and R&D, upgrading from a “spice leader” to a comprehensive flavor solutions provider covering front-of-house, back-of-house, foodservice chains, and food industry clients.

Investors’ other concern about McCormick relates to the “big fish swallowing the small fish” behind this deal. According to the announcement, the merger involves: 1) equity stake, with Unilever and its shareholders holding 65% of McCormick, valued at about $29.1 billion; 2) asset integration, significantly expanding McCormick’s revenue scale. Data shows McCormick’s revenue in 2025 will be only $6.8 billion, while Unilever’s food business revenue in 2025 is €12.9 billion (about $14.87 billion). The combined revenue will surpass $20 billion.

Additionally, McCormick will pay Unilever $15.7 billion in cash. Based on this, the total value of the equity plus cash is $44.8 billion. The integration of channels, products, personnel, and other aspects to merge the “small fish” into the “big fish” will be a major challenge.

“This is a complex integration involving two global giants, and the difficulty should not be underestimated. Any strategic synergy ultimately needs to be implemented in organization, culture, processes, and personnel,” said Zhang Ji, a specially appointed researcher at the China Condiment Industry Association Data Center, to the Daily Economic News.

What does the birth of a $20 billion annual revenue seasoning giant mean for the Chinese market?

Undoubtedly, this deal is significant not only for Unilever and McCormick but also for the seasoning industry. How the merger of two leading players in the seasoning field will shake up the market, especially in China, is worth watching.

For Chinese consumers, McCormick is most familiar for its transparent bottles and black caps of spices like star anise, pepper, garlic powder, etc. Zhang Ji told reporters: “McCormick’s core categories in China include chicken essence, ketchup, spices, mainly serving large B-end channels like McDonald’s and retail C-end channels.” Data shows that in recent years, McCormick has ranked among the top in offline retail market share in China for chicken essence, Western-style sauces, and spices.

Unilever’s food business in China mainly includes the Knorr brand’s chicken essence, chicken powder, and chicken broth series, as well as cooking aids like concentrated soup bases and foodservice solutions. Its core channels are mainly small B-end (business-to-business), including independent restaurants, small and medium-sized chain restaurants, and hotel kitchens.

From this perspective, Unilever and McCormick have distinct category advantages and channel advantages in China, with significant potential for synergy. Zhang Ji believes that tomato ketchup/sauce is the most likely area for major changes following this merger, which could impact well-known domestic and international ketchup/sauce brands, including Heinz, Lee Kum Kee, and Haitian.

Chen Xiaolong’s view is that “this is an important variable but not a disruptive one.” “In the short term, it won’t change the overall landscape of soy sauce, oyster sauce, vinegar, and other basic seasonings, which are still mainly dominated by local giants. The real pressure will be on chicken essence, chicken powder, broth, spices, Western sauces, professional kitchen seasonings, and chain restaurant standardized solutions.” he told reporters.

Beyond market share impacts within specific segments, a more critical issue is the disruption of business models. Industry insiders mentioned that the emergence of this giant will rewrite future competition methods. “The merged company will not just sell products but also deliver brands, flavor R&D, chef services, standardized recipes, supply chain, and industrial capabilities. For Chinese companies, the real challenge is not just a bigger company but a more capable ‘restaurant solution’ global competitor,” Chen Xiaolong said.

The market’s “foot voting” reflects the enormous uncertainty of this integration. But when two giants truly join forces, the rules of the global seasoning industry may also be rewritten.

Daily Economic News