Suitors Line Up for Unilever’s $2 Billion Brand Sale

Source: Thinkstock

Source: Thinkstock

Possible suitors for Unilever‘s (NYSE:UL) pasta sauce brand Ragu include Hormel Foods Corp., J.M. Smucker Co., Pinnacle Foods Inc., Hillshire Brands Co., Post Holdings Co., and Japan’s grocery supplier Mizkan Co., Bloomberg reported on Thursday.

Ragu is expected to fetch as much as $2 billion at auction; the first rounds of bids are due at the end of this week, and all of the aforementioned potential buyers have contacted banks to discuss their interest, according to sources with knowledge of the matter said, per Bloomberg.

Unilever has spent the past few years focusing on its health and beauty brands, while gradually selling off food brands. The company sold Ragu in the UK in 2011. It sold Skippy peanut butter and Wish Bone last year, and last month it sold its European meats business, which included the Peperami brand.

A spokesperson for Unilever as well as representatives for all of the rumored potential buyers declined to comment on the Ragu auction, Bloomberg said Thursday.

Ragu was founded in 1937 in Rochester, New York, and the brand was first acquired by Unilever in 1987. The brand currently accounts for approximately 40 percent of Unilever’s $1.2 billion pasta-sauce sales. However, sales have declined about 18 percent since 2009, primarily due to the increasing popularity of many private-label sauces, which now account for a quarter of the market, according to Bloomberg.

That said, Ragu remains the best selling pasta sauce in the United States, commanding 27 percent of the market, according to statistics from Euromonitor International, per Bloomberg. Campbell Soup Co.’s Prego brand is second, accounting for about 18 percent of the market.

Ken Harris, a managing partner at Cadent Consulting Group said of Ragu, “It’s a great brand … it needs some care and feeding.” Bidders are hoping that pouring money into the brand’s marketing budget as well as innovations into new products such as prepared foods made with Ragu could give Ragu a boost, as sales of the sauce has stagnated in recent years.

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