Kraft craves Unilever after rejected offer

Unilever rejected the approach and called the price too low, while Kraft Heinz says it’s still interested in a deal.

Kraft Heinz is attempting to buy Unilever in a $143 billion deal that would join the U.S. maker of cheeses and lunch meats with the European producer of mayo, teas and seasonings in a global powerhouse.

Unilever rejected the approach and called the price too low, while Kraft Heinz says it’s still interested in a deal. The shares of both companies surged to new highs as investors saw prospects for cost cutting.

A combination of Kraft Heintz, which sells Oscar Mayer meats, Jell-O pudding and Velveeta cheese, and Unilever, which owns brands including Hellmann’s, Lipton and Knorr, would rival Nestle as the world’s biggest packaged food maker by sales.

That might not lead to big changes that customers would notice on the supermarket shelves. But it’s people’s changing tastes, shifting away from boxed and canned groceries in favor of items that seem fresher or healthier, that are driving deal-making in the food industry.

Companies like Kraft Heinz, itself formed from two century-old businesses in 2015, are trying to find new avenues for growth amid heightened competition.

Part of the challenge is the proliferation of smaller food makers marketing more wholesome products, which makes it harder for the established companies to drive up sales simply by selling more of their wellknown products or by raising prices, as they have in the past.

“That obviously has its limits,” said David Garfield, head of the consumer products unit at consulting firm AlixPartners.

Instead, companies are being forced to dig deeper to find cost efficiencies or tap into new markets, Garfield said. That can include mergers that result in consolidated manufacturing systems, or that give companies access to distribution networks in regions of the world where they don’t have a big presence.

Those were some of the factors that drove Oreo and Chips Ahoy maker Mondelez International — which was split from Kraft in 2012 —to make an unsuccessful takeover bid for Hershey last year before retreating. And they were among the reasons cited by executives in the Kraft Heinz tie up, which was engineered by Warren Buffett’s Berkshire Hathaway and 3G Capital, the Brazilian investment firm with a history of taking over companies and aggressively cutting costs.