LONDON, March 19 (Reuters) - Unilever ( UL ) shares were down on Thursday, extending losses from Wednesday after a report the company may spin off its food business, and had held merger talks with Kraft Heinz that have ended.

Investors and analysts said they are concerned that CEO Fernando Fernandez could be distracted from the day-to-day running of Unilever ( UL ) by the potential separation, questioning ‌the benefits so soon after its protracted ice cream unit split.

More than one Unilever ( UL ) CEO has tried to focus the company's portfolio on its other units by expanding in personal care and beauty, selling some food brands.

Alan Jope and Hein Schumacher who failed to do so fast enough were ousted. Jope made three bungled and unpopular bids for GlaxoSmithKline's consumer health brands - now spun off as Haleon - before he stepped down in 2022.

HOW MUCH IS UNILEVER'S FOOD BUSINESS WORTH?

Unilever's ( UL ) packaged food business accounts for over a quarter of group sales, but it has faced mounting scrutiny over ultra-processed products, competition from private label brands, and softer demand as the rise of weight-loss drugs changes consumer buying habits.

Home to Knorr bouillon powders and Hellmann's condiments, the division's underlying operating margin - which excludes the impact of foreign currency exchange rates - was 22.6% of revenue, outstripping the group's 20% margin last year.

The food business, which also makes Knorr bouillon cubes and Marmite spreads, reported ​an operating profit of 2.9 billion euros ($3.34 billion) last year, giving it an enterprise value of roughly 30 billion euros, according to Barclays estimates.

SLOWER TO GROW COMPARED WITH THE REST

The unit, Unilever's ( UL ) second largest by sales after personal care, grew at 2.5% last year, more slowly than the rest of the business and well below the company's own mid-term goal.

Underlying sales growth at Unilever's ( UL ) foods business has lagged that of other units since the COVID-19 pandemic highs, repeatedly falling short of the conglomerate's annual goal of sales growth of between 4% and 6%.

Analysts and investors question the long-term prospects of the packaged food industry when politicians, including U.S. Health Secretary Robert F. Kennedy Jr have spoken out about the health risks of processed foods, and many shoppers are turning to GLP-1 weight-loss drugs.

DEVELOPED MARKETS HAVE REACHED SATURATION

Part of the problem is that the business is operating in two contexts: developed and emerging markets. Unilever's ( UL ) food business is growing more slowly in North America and Europe than in countries such as India and parts of Latin America, where the group has a stronghold in food and private label products are less sophisticated, meaning they offer less competition.

"There is more growth in emerging markets, which accounts for 55% of food for Unilever ( UL ), but it's still not enough to make up for Europe and the U.S. where the market is saturated," Barclays analyst Warren Ackerman said.