Unilever Plc, under the leadership of Chief Executive Officer Hein Schumacher, has unveiled plans to separate its ice cream business, which includes renowned brands such as Ben & Jerry’s, as part of a broader restructuring initiative aimed at enhancing growth prospects. This restructuring will entail cutting 7,500 jobs, primarily affecting office-based roles, in a bid to achieve €800 million in cost savings over the next three years.
The company stated that various options are under consideration for the separation, with a demerger being the most probable choice, leading to the creation of a new listed business. Unilever’s ice cream division reported sales of €7.9 billion ($8.6 billion) in 2023.
This strategic move is aligned with Schumacher’s efforts to streamline Unilever’s operations, focusing on four core businesses: beauty and wellbeing, personal care, home care, and nutrition. The decision to separate the ice cream unit is expected to alleviate challenges associated with controversies over political stances taken by Ben & Jerry’s, a subsidiary of Unilever.
In December 2022, Unilever settled a legal dispute with Ben & Jerry’s independent board after the brand objected to its products being sold in the Israeli-occupied West Bank. Furthermore, earlier in the same year, Unilever criticized Ben & Jerry’s for a social media post that condemned US President Joe Biden’s actions, which Unilever perceived as fanning “the flames of war” prior to Russia’s invasion of Ukraine.
Analysts, including James Edwardes Jones from RBC Capital Markets, have expressed support for the separation of the ice cream business, citing its slower growth profile and lack of cost synergies due to its cold supply chain. Unilever’s revenue witnessed a 4.7% growth in the final quarter of 2023, slightly surpassing analysts’ expectations, driven by a increase in the volume of products sold.
The separation of the ice cream business, which encompasses brands such as Magnum, is anticipated to position Unilever for mid-single digit growth in underlying sales, coupled with a modest margin improvement.
Schumacher, who assumed the CEO position from Alan Jope, aims to revitalize growth at Unilever by focusing investments on its top 30 brands, representing approximately three-quarters of the company’s revenue. The separation process of the ice cream business is slated to commence immediately and is expected to conclude by the end of next year.
The decision to separate Unilever’s ice cream business comes amidst Schumacher’s tenure as CEO, following the involvement of activist investor Nelson Peltz in the company’s affairs. Peltz’s stake in Unilever and subsequent board membership were prompted by a failed attempt to acquire GSK Plc’s consumer health division.
Unilever’s move to focus on its core businesses aligns with industry trends, with rival Nestle SA having previously separated its ice cream business through a joint venture with private equity firm PAI Partners. This strategic restructuring aims to enhance Unilever’s operational efficiency and profitability, providing the company with the flexibility to allocate resources more effectively across its remaining divisions.
Analysts suggest that if the proposed cost savings materialize, Unilever could reinvest in research and development and marketing efforts, potentially driving further growth and market expansion. Despite challenges such as supply chain disruptions and shifting consumer preferences towards private-label goods amid inflationary pressures, Unilever remains optimistic about its future prospects.
The separation of the ice cream business, including iconic brands like Ben & Jerry’s and Magnum, is expected to streamline Unilever’s portfolio, mitigating potential controversies and operational complexities associated with its cold supply chain. As Unilever embarks on this journey of transformation and optimization, it remains committed to delivering value to its stakeholders while navigating the evolving landscape of the consumer goods industry.
In conclusion, Unilever’s strategic decision to separate its ice cream business underscores its commitment to driving long-term sustainable growth and unlocking shareholder value. With a clear focus on its core businesses and a dedication to operational excellence, Unilever is poised to navigate the challenges and opportunities that lie ahead in the dynamic global market.