Unilever’s Ice Cream division to become standalone business
Unilever announced steps to accelerate its Growth Action Plan through the separation of its ice cream division and the launch of a major productivity program.
The board said it believes that Unilever should be increasingly focused on a portfolio of unmissably superior brands with strong positions in highly attractive categories that have complementary operating models. This is where the company can most effectively apply its innovation, marketing and go-to-market capabilities. Ice Cream has a very different operating model, and as a result the board has decided that the separation best serves the future growth of both the division and the company.
Following separation, Unilever will become a simpler, more focused company, operating four business groups across beauty and wellbeing; personal care; home care and nutrition. These business groups have complementary routes to market, and/or R&D, manufacturing and distribution systems, across both developed markets and Unilever’s extensive emerging markets footprint, the company noted.
The separation of Ice Cream will assist Unilever’s management to accelerate the implementation of its GAP, announced in October 2023, which is focused on doing fewer things, better, with greater impact to drive consistent and stronger topline growth. In addition, Unilever will continue to optimize its portfolio within the four business groups, the company said.
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The separation of Ice Cream will create a world-leading business, operating in a highly attractive category, with brands that together delivered turnover of €7.9 billion in 2023, the company said. The business has five of the top 10 selling global ice cream brands including Wall’s, Magnum and Ben & Jerry’s.
Under new leadership, Ice Cream already is making significant operational changes to drive stronger performance. These include improved productivity and efficiencies, product rationalization and investment behind significant innovations.
"A demerger of Ice Cream is the most likely separation route, and in that case we expect the company to operate with a capital structure in line with comparable listed companies. Other options for separation will be considered to maximize returns for shareholders. The costs and operational dis-synergies relating to the separation of Ice Cream will be determined by the precise transaction structure chosen," the company said.
Separation activity will begin immediately, with full separation expected by the end of 2025. Further information will be provided in due course.
Building on the early momentum of GAP Unilever said it has identified additional efficiencies that can now be accelerated. In addition to the portfolio changes, Unilever intends to launch a comprehensive productivity program, driving focus and faster growth through a leaner and more accountable organization, enabled by investment in technology.
The productivity program is anticipated to deliver total cost savings of around €800 million over the next three years, more than offsetting estimated operational dis-synergies from the separation of ice cream. Incremental net savings from the program beyond dis-synergies will provide flexibility for accelerated growth investments behind our brands and R&D and support margin improvement over time.
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The proposed changes are expected to impact around 7,500 predominantly office-based roles globally, with total restructuring costs now anticipated to be around 1.2% of group turnover for the next three years (up from the around 1% of group turnover previously communicated). These proposals will be subject to consultation.
"The separation of Unilever and Ice Cream in combination with the productivity program will ensure that Unilever’s financial and management resources are focused on its strongest, global or scalable brands. These will have the capability to drive category expansion and deliver accelerated, sustainable levels of growth and improved profitability. After separating Ice Cream and implementing the productivity program, Unilever will have a structurally higher margin. Post separation, Unilever aims to deliver mid-single digit underlying sales growth and modest margin improvement," Unilever said.
Ian Meakins, chair of Unilever said, “The board is determined to transform Unilever into a higher-growth, higher-margin business that will deliver consistently for all stakeholders. Improving our performance and sharpening our portfolio are key to delivering the improved results we believe Unilever can achieve. The separation of Ice Cream and the delivery of the productivity program will help create a simpler, more focused, and higher performing Unilever. It will also create a world-leading ice cream business, with strong growth prospects and an exciting future as a standalone business.”
Hein Schumacher, CEO of Unilever said, “Under the Growth Action Plan we have committed to do fewer things, better and with greater impact. The changes we are announcing today will help us accelerate that plan, focusing our business and our resources on global or scalable brands where we can apply our leading innovation, technology and go-to-market capabilities across complementary operating models.