Shoppers turn to smaller food brands, cutting into Unilever, P&G profits

By Jessica DiNapoli, Svea Herbst-Bayliss, Siddharth Cavale and Abigail Summerville

NEW YORK (Reuters) - Big Food's worst nightmare is unfolding across U.S. supermarket aisles.

Shoppers, weary of high prices and highly-processed packaged food, are increasingly buying from smaller food brands, threatening the growth of billion-dollar products from conglomerates such as Unilever.

Consider Hellmann's mayonnaise, one of Unilever's biggest brands globally. The condiment is losing market share to less-well-known rivals such as Duke’s Mayo, which was founded in the U.S. south, and Mike’s Amazing mayo, which is gaining traction in the U.S. northeast, where it says it is the fastest growing condiments brand. Both are often priced for less than Hellmann's.

A 30-ounce jar of Duke's, for example, is priced below $5 versus Hellmann's $6.49 for the same size. It is now one of the country's fastest growing brands of mayo with more than $100 million in sales, according to the buyout firm that acquired its parent company, Sauer Brands, for about $1.5 billion in January. 

Duke's market share grew to 9% from 6% in 2021, said Joe Tuza, Sauer Brands chief growth officer. The sugar-free mayo is the country's fifth-largest by market share, Tuza said, behind Hellmann's and other Kraft Heinz and Unilever brands. 

The rival products' success shows the challenges facing global consumer product and food marketers such as London-based Unilever, which in February surprised retailers, investors and employees when it replaced its second CEO in two years, Hein Schumacher, in part because he failed to turn around its 60.8 billion euro business quickly enough.

Unilever declined to comment for this story. 

The company paid $24.3 billion, including the assumption of debt, to acquire Hellmann's owner Bestfoods in 2000, expanding its presence in food. Unilever has aggressively marketed Hellmann's, and launched new flavors of the condiment, but in recent years, the brand's hold has weakened in the U.S. mayo category, according to Euromonitor data tracking brick-and-mortar and online retailers.

Adam Theo, 45, of Arlington, Virginia, said he switched to Duke's after a friend introduced him to the condiment about three years ago. "Before that, I never thought much about my choice of mayonnaise,” he said.

Unilever's food business, dominated by Hellmann’s and Knorr seasonings, saw sales volume remain roughly flat last year, while prices rose, Fernando Fernandez, who was Unilever's chief financial officer, said last month. Fernandez replaced Schumacher as CEO on March 1.

Fernandez said Hellmann's and Knorr performed better than Unilever's other food brands.

'SHOWN THE DOOR' 

Volume sales of packaged food in the United States, Unilever's biggest market, have been pressured due to price hikes.

The makers of household staples, ranging from condiments like Hellmann's to Procter & Gamble's Luvs diapers, have seen some shoppers drift away from their products due to steep prices and fewer innovative products that shoppers would pay more for.

About two weeks before announcing Schumacher's departure, Unilever reported lackluster full-year earnings and said it has had a slower start to 2025, sending its shares crashing.

The board declined to detail how Schumacher lost directors' support but a source familiar with its thinking said the decision to dismiss the 53-year-old executive was unanimous.

Unilever hired Schumacher as CEO in 2023 from Dutch dairy cooperative FrieslandCampina with the backing of Nelson Peltz, a billionaire U.S. hedge fund manager who first invested in Unilever in 2022 and joined the board several months later.

A representative for Peltz declined to comment.

In his 18 months on the job, Schumacher announced plans to sell some of Unilever's smaller food brands, worked to spin out its ice cream business and cut thousands of jobs. Shares had been up about 9% in his tenure.

Rival Nestle, the world's biggest food maker, has also endured turmoil at the top. In August, it fired CEO Mark Schneider, tapping insider Laurent Freixe to replace him. 

A Nestle spokesperson said its U.S. brands, which include Lean Cuisine and Coffeemate, are either in the top spot or second position in 13 categories, including instant coffee and frozen meals.

"Underperforming CEOs are more exposed than ever to the risk of being shown the door," said Matteo Tonello, head of benchmarking and analytics at research group The Conference Board. Consumer products CEOs must deftly manage not only changing consumer habits but also supply chain disruptions and high commodity prices, he said.

Four investors and bankers who spoke with Reuters said the talent pool to run a consumer goods company is limited, partly because executives choose other fields, like tech. The people said joining the ranks of diaper, detergent and canned food makers was not considered sexy two decades ago when executives who should now be in line for the CEO job were graduating from business school. 

This has forced several consumer companies, including Nestle and Unilever, to pick an insider for the top spot instead of finding an outsider to take over.

RISE OF 'INSURGENT' PRODUCTS

Part of the problems facing companies like Unilever, Kraft Heinz and Nestle are smaller, fast-growing independent brands like Duke’s, according to four industry consultants. Procter & Gamble lost its footing in value-priced diapers, while Kraft Heinz's boxed macaroni and cheese is under threat from Gooder Foods' Goodles.

A Procter & Gamble spokesperson said it upgraded its Luvs diapers and added new Pampers products to serve all consumers.

Kraft Heinz did not respond to a request for comment.

Consumer goods makers delayed developing new products during the pandemic and immediately after, leaving an opening for newer brands. 

Bain & Co tracks fast-growing, independently-owned consumer brands, which it calls "insurgents." The consulting firm found that these brands, a list which has included Chobani yogurt and Fatty jerky, accounted for 39% of growth in 2024 in their categories, such as food or personal care. That's up from 17% in 2023, Bain said.

Former Olympian Samyr Laine, now an investor in food start-ups including electrolyte drink maker Berri Organics, said bureaucracy and red tape are the largest hurdles for big food makers.

"It takes a lot of yeses and lots of presentations to just get going, and their infrastructure isn't built to do smaller things and incubate and test in smaller communities," said Laine, who has met with executives at firms such as Diageo, Unilever, P&G and Moet Hennessy to incubate new brands or pitch products.

To drive sales volume, Unilever ran its fifth consecutive Super Bowl ad this year, featuring a tongue-in-cheek visit to a New York deli with the lead actors from the 1989 romantic comedy hit "When Harry Met Sally."

But Hellmann's has seen its share fall to 46.7% of the U.S. mayo market last year from 50.6% in 2022, Euromonitor found. 

Four consumer industry bankers said Unilever can be slow to make M&A decisions.

The conglomerate has sold some of its businesses to private equity firms in the last decade including its spreads business, tea business and a group of personal care brands called Elida Beauty.

Unilever has acquired a few fast-growing start-up brands, including high-end mayo brand Sir Kensington's in 2017 - though they were not among the bidders for Duke's, according to a source close to the deal.

(Writing by Jessica DiNapoli with additional reporting by Svea Herbst-Bayliss, Siddharth Cavale, Abigail Summerville and Arriana McLymore in New York. Editing by Vanessa O'Connell and Claudia Parsons)