The Strategy Pathfinder, 3rd Edition

7Corporate Advantage

Large firm diversification activity has frequently been followed by a process of ignominious sell-offs and retrenchment.

Michael E. Porter, Harvard Business Review

In February 2017, Kraft Heinz made a £112bn ($143bn) hostile bid for Anglo-Dutch Unilever to create the world’s second-largest consumer goods company by revenue. Kraft Heinz was formed in 2015 through the merger of Kraft Food Group and Heinz and focuses upon food and drinks products. Unilever has major foods and refreshments divisions as well as home care and personal care divisions. Since 2015, Unilever has been shifting its focus away from slow growing food brands towards health and beauty products. The unwanted bid raised questions of the Unilever management team, and their shareholders, about whether they are managing the organisation effectively and whether other managers might do a better job. Implicitly it questioned whether Unilever’s businesses add benefit to each other or whether they are just a collection of separate activities. Should any of them be sold off? Not surprisingly, the bid got a sharp reaction from Unilever which said it had “no merit, financial or strategic, for Unilever shareholders. There is no basis for any further discussions.” Two days later Kraft Heinz withdrew its bid. However, some months afterwards Unilever has announced that it has turned its spreads business including Flora, Stork, County Cork and other low-growth brands into a separate business unit, perhaps ...