Unilever, one of the world's largest consumer goods companies, has announced plans to spin off its ice cream business, which includes popular brands such as Magnum, Ben & Jerry's, Cornetto, and Kwality Wall's. The decision, which is part of a broader strategic overhaul, was welcomed by investors, sending the company's shares up nearly 6% at one point on Tuesday.
The spinoff is set to begin immediately and is expected to be completed by the end of 2025. Unilever CEO Hein Schumacher stated that the ice cream business is "in the process of moving to a separate head office in Amsterdam," but he remains "open to options" regarding where it could eventually list.
Alongside the spinoff announcement, Unilever also launched a cost-saving program that aims to reduce expenses by around 800 million euros ($869 million) over the next three years. The proposed changes are expected to impact approximately 7,500 jobs globally, mostly in office-based roles, with total restructuring costs anticipated to be around 1.2% of overall turnover during the period. The job cuts will affect about 5.9% of Unilever's workforce of roughly 128,000 people.
Schumacher, who became CEO in July 2022, has been working to simplify the business and win back investor confidence after acknowledging that Unilever had underperformed in recent years. His predecessor, Alan Jope, faced criticism for allowing the group's brand portfolio to grow to about 400, which some argued distracted management from its best-performing products.
The underperformance attracted the attention of billionaire activist investor Nelson Peltz, who took a seat on Unilever's board in 2022 via his Trian investment vehicle. Trian, which owns a 1.45% stake in Unilever, expressed support for the strategic initiatives announced on Tuesday. "Nelson Peltz looks forward to continuing to work with the other members of Unilever's Board as the company executes on initiatives to increase long-term stakeholder value," Trian said in a statement.
The decision to spin off the ice cream business is based on the Unilever board's view that the company should focus on "superior brands with strong positions in highly attractive categories that have complementary operating models." The ice cream division has a different operating model compared to Unilever's other businesses, and the separation is expected to best serve the future growth of both the ice cream segment and Unilever as a whole.
Unilever's ice cream businesses have "distinct characteristics," including a supply chain and point of sale that support frozen goods, a different channel landscape, more seasonality, and greater capital intensity. The company's profit margin on ice cream is less than half of what it makes selling personal care products, according to Bloomberg.
The spinoff will end an unusual corporate partnership that began in 2000 when Unilever bought Ben & Jerry's for $326 million. At the time of the purchase, the Vermont-based ice cream maker stipulated that it would have an independent board, which allowed it to continue taking openly progressive stances on social and political issues. This sometimes caused friction with Unilever, such as a 2022 lawsuit over the sale of Ben & Jerry's business in Israel and the country's West Bank region.
Investors and analysts have reacted positively to the announcement, with Richard Saldanha, portfolio manager at Aviva, noting that the ice cream business "has been quite a volatile business and has also been dilutive from a margin standpoint, so we think strategically this makes sense." Jack Martin, portfolio manager at Oberon Investments, called the news "great for shareholders," as the ice cream division "has been a drag on the business as a whole for some time."
As Unilever embarks on this significant strategic shift, CEO Hein Schumacher acknowledges the challenges ahead. "We have a big agenda," he said. "This is going to be a very busy period for the next 18 months or so." The company aims to deliver mid-single-digit underlying sales growth and modest margin improvement after the split, as it focuses on streamlining its operations and boosting the performance of its core brands.
