Remgro’s margarine deal: A case of good, butter, best?

There appears to be a lot of conjecture around whether investment behemoth Remgro has landed with its bum in the butter with the R7bn acquisition of “spreads” brands – such as Stork, Rama and Flora – from consumer goods giant Unilever.
One suspects – especially after certain recent corporate activity – Remgro would be determined not to overpay for such a sizable acquisition.
But investors were still pressing for more flavour on the transaction during Thursday’s investor presentation. Remgro CEO Jannie Durand, however, was reluctant to respond in detail.
Specifically, Durand was asked what proportion of Unilever’s earnings the spreads business comprised as well as the potential operating costs.
He stressed Remgro – which has created a new subsidiary, Silver 2017, to house the spreads brands – would need to establish its own cost base after carving the operations out of the Unilever systems.
It seems Remgro is confident of running a leaner show with Durand hinting that the cost allocation models common in big corporations would not be replicated under the Remgro regime. Perhaps of concern, in terms of the bigger picture, is that margarine spreads appear to be losing market share – at least internationally – to more organic products like butter.
Margarine does still offer a cheaper alternative to butter in SA – and presumably Remgro is banking on this trend holding for the foreseeable future.