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 ( KHC ) 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 ( HLN ) - 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.