Shares of Hellmann’s mayonnaise owner Unilever and Frank’s RedHot sauce maker McCormick fell on Tuesday following the announcement over concerns about the transaction’s structure, long path to closing and antitrust risks.

The top U.S. spice maker, home to more than 30 household brands, is playing the long game, some analysts said.

While many food companies are scrambling to reformulate products and resize portions as the surging popularity of GLP-1 weight-loss drugs reshapes eating habits, McCormick argues that flavor will remain essential even as calorie counts fall.

“We will continue to flavor calories while others compete for them,” McCormick CEO Brendan Foley, a packaged-food industry veteran, said on a call with investors on Tuesday.

“As consumers increasingly focus on cooking at home, adding more protein and produce, and pursuing healthier lifestyles, flavor plays a critical role in elevating those choices,” Foley said.

The GLP-1 bet

The surge in weight-loss drug use has consumers craving more flavor ‌in their food, leading to condiment and spice makers benefiting and attracting more interest in the M&A marketplace, dealmakers have said.

“Consumers shifting away from fatty, greasy, or overly sweet foods … creates a massive opportunity for flavor enhancers (spices and hot sauces) that provide sensory satisfaction without adding calories,” said Timothy Malefyt, professor of marketing at the Gabelli School of Business at Fordham University.

The deal will also help the U.S. company tap into Knorr stock cubes maker Unilever’s global scale and expertise, executives said on Tuesday’s investor call. Unilever executives highlighted its popular flavors such as Asian and Chinese.

“McCormick with this could be well-positioned to create the right nutritional functional benefit in food that is lacking in America right now,” said Mike Anstey, founder of Pilot Lite, a global CPG (consumer packaged goods) commercialization partner.

It would also open up key emerging markets such as Brazil, China and countries across Europe, the Middle East and Africa (EMEA).

“(The deal) represents a step-change in scale, broadening MKC’s exposure to faster-growing emerging markets and expanding opportunities for its foodservice platform,” Jefferies analyst Scott Marks said in a note.

Unkind market conditions

McCormick is seeking new markets and flavors against the backdrop of a tough U.S. market, where consumers are eating healthier and also looking for cheaper pantry alternatives and smaller pack sizes to stretch budgets hit by inflation.

“We’re certainly aware of the near-term pressures facing not just the food industry but broadly … the conflict in the Middle East and the broader CPG space. However, we continue to believe in just the long-term fundamentals that really underpin the confidence in this combination,” McCormick’s Foley said.

The company’s total volume growth has slowed over the last year, and was down 0.7 per cent in the most recently reported quarter, falling across both its consumer brands and flavor solutions segments.

“Despite the combination’s strategic merits, we think this may be a ploy to incite growth in an industry where gains have stagnated,” said Erin Lash, analyst at Morningstar Research.

Rival Kraft Heinz, which media reports said had explored a bid for Unilever’s food business, underscored the tougher U.S. market when it paused plans for a split.

“Investors should look at this transaction more optimistically than broken deals like Kraft Heinz because it creates value through greater depth in a single category, flavorings, rather than diversification,” said TD Cowen analyst Robert Moskow in a note.

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The biggest U.S. pork processor also is paying close attention to trade and immigration policy changes under U.S. President Donald Trump as it exports pork and relies on a diverse group of meatpacking workers, Smith said in an interview.

WH Group, the world’s largest pork producer, spun off Smithfield as Trump has threatened tariffs on imports from major pork consumers, including China and Mexico, that could trigger retaliatory duties that hurt U.S. agricultural exports.

Smithfield was valued at $8.1 billion (C$11.7 billion) after its shares ticked up in a muted debut.

Before the listing, the company carved out its European business, ended contracts with some U.S. hog farms and shut a California pork plant in recent years.

“We believe that really the heavy lifting is done,” Smith said. “This next phase will be focused on growth.”

U.S. farmers, who deliver hogs to processing plants, and slaughterhouse workers have been on edge about the risk for further plant closures.

Smithfield closed a plant in Vernon, California, and another in Charlotte, North Carolina, in 2023. It also stopped slaughtering pigs at its hometown plant in Smithfield, Virginia, in 2021.

The company is not alone: Tyson Foods shuttered an Iowa pork plant last year, and has closed U.S. poultry plants with thousands of workers.

“I think the hog supply is relatively well balanced for that shackle space,” Smith said.

Smithfield looks to use more of its fresh pork in its packaged meats business to reduce its exposure to export markets, Smith said. It can also redirect offal products, such as kidneys or stomachs, to U.S. pet food companies from China, a major buyer, he added.

Export sales represented 13 per cent of Smithfield’s total sales for the nine months ended Sept. 29, according to a regulatory filing.

“If there are further tariff escalations that make those markets that we go to with that product not attractive, we always think about it in the terms of the next best sale,” Smith said.

Trump has also kicked off a sweeping immigration crackdown. More than half of all U.S. meatpacking workers are immigrants, compared with about 17 per cent of the entire workforce, according to the Center for Economic and Policy Research, a think tank.

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