By David Wainer
Running a big food company these days is like fishing in a dried-up pond.
After years of hiking prices without improving products much, companies like General Mills, Campbell's and Kraft Heinz are learning the hard way that there is little marginal growth left. Volume has dried up as shoppers trade down to store brands or reach for a GLP-1 prescription instead of a snack. Whatever excitement remains is being scooped up by upstarts that look fresher and healthier than the legacy brands gathering dust in the middle of the aisle.
Executives have few great options. Cut prices -- as PepsiCo and General Mills are now doing on some products -- and you erode margins with no guarantee that volumes return. Slash costs, and you risk hollowing out the brands. Invest in marketing and innovation, and Wall Street might lose its patience before the results show up. Now, energy and fertilizer prices could drive costs up further.
That leaves mergers and acquisitions as an alternative, but history favors focused, bolt-on deals over sprawling mega-mergers. McCormick has excelled at the former, building a small empire out of Frank's RedHot, French's mustard and Cholula hot sauce. Now it is flirting with the latter, weighing a massive merger. It could pay off, but successfully executing a deal of that size is no small feat. Bargain-hunters in McCormick stock shouldn't expect a quick return.
Shares of the spice-and-flavor company have tumbled 35% over the past year, as investors worry about margins and slower growth. Against that backdrop, McCormick is in talks to combine with Unilever's food division, home to Hellmann's mayonnaise, Knorr bouillon and roughly $15 billion in annual sales. McCormick has coveted these assets for years. A deal would transform the company from a mostly U.S.-focused operation into a true global flavor powerhouse.
The strategic logic is clear, but Big Food's history of mega-mergers is a cautionary tale. Kraft Heinz remains the classic example: a 2015 merger of two industry stalwarts followed by brutal cost cuts that hollowed out its own brands. Other scale plays have fared little better, leaving acquirers with stagnant portfolios instead of durable growth. BNP Paribas analysts Misha Omanadze and Max Gumport found that of 45 major consumer packaged-goods deals since 2000, roughly half resulted in significant impairment losses, and the five largest all failed to deliver on promises.
On paper, the McCormick--Unilever deal makes sense. Bigger scale would give McCormick far more leverage with retailers, while the brands would gain sharper focus. Unilever's food unit has long played second fiddle to personal care. As analyst Chris Beckett at Quilter Cheviot puts it, inside Unilever food brands often got "a minute or two at the end of the conversation." Analysts also see meaningful synergies, including cost savings and cross-selling opportunities.
Execution, however, remains the ultimate test. McCormick has never integrated a business with this level of global and emerging-market exposure; Unilever's far larger and far more global supply chains, customer mix and regulatory complexity are beyond anything it has acquired. Success will likely require heavy investment in the core brands, along with tough choices to divest or de-emphasize others. Other popular brands include Marmite yeast extract and Colman's mustard.
Another risk is overestimating growth. J.M. Smucker's overpayment for Hostess Brands, based on excessively optimistic expectations for Twinkies, is a recent example of how that can go wrong. For the deal to work, price and structure matter as much as strategy. Unilever as a whole trades at a multiple that reflects its faster-growing personal-care and consumer businesses.
McCormick, however, would be buying the barely-growing food division. Paying around $35 billion for the enterprise value, or about 10 times the food division's 2026 earnings before interest, taxes, depreciation and amortization -- less than the roughly 13 multiple Unilever commands -- would provide a significant earnings boost for McCormick, says Gumport.
Because Unilever's food business dwarfs McCormick's, there would be significant dilution for McCormick's current shareholders. That dilution could come alongside an increase in debt as well for the newly formed company.
In other words, this is a huge bet. At the wrong price, the company that avoided its peers' mistakes for years could make its biggest error yet. At the right price, with disciplined execution, it could become a rare success story in the world of Big Food mergers.
Write to David Wainer at david.wainer@wsj.com
(END) Dow Jones Newswires
March 29, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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