Hindustan Unilever to separate ice cream business following board decision

A new blend: Portfolio churn will help it strengthen core offerings in demand spaces

Hindustan Unilever’s (HUL’s) board of directors decided in a meeting held on Wednesday to separate the ice cream business. In September, the board constituted a committee of independent directors to evaluate the business’ future.

 

“The board’s decision to separate is in line with the recommendations made by the independent committee following a comprehensive review of the business,” it said in its stock exchange filing.

 

The committee noted that the ice cream business is a high-growth category requiring considerable investment to realise its full potential, contributing roughly 3 per cent of HUL’s turnover.

 

It also said in the filing, “Given that Unilever owns the trademarks and know-how and has announced the separation of its ice cream business, local capabilities will need to be developed to continue running the business.”

 

HUL added that the ice cream segment has a different operating model, including cold chain infrastructure and a distinct channel landscape, which limits synergies with the rest of HUL.

 

“This portfolio restructuring will enable HUL to sharpen its focus on the core business and further strengthen its position in trending demand spaces such as beauty, food, health, and well-being,” the company added.

 

The maker of Kwality Wall’s ice creams also said that this separation would allow the ice cream business to operate with greater flexibility and focus.

 

“With the aim of maximising value for all shareholders, the board, based on the recommendations of the independent committee, will determine the mode of separation by the end of this year,” the filing added.

 

This announcement follows Unilever’s statement earlier this year regarding the separation of its global ice cream business across jurisdictions.

 

In March, Unilever also announced the launch of a comprehensive productivity programme to drive focus and growth through a leaner and more accountable organisation. At that time, Unilever initiated the consultation process in Europe with employees who may be impacted by the proposed changes.

 

While discussing the separation of the ice cream business, Ritesh Tiwari, chief financial officer at HUL, said during the results press conference, “There are two modes of separation: we could either sell the business or demerge and list it. Both options are being evaluated.”

 

He also mentioned that an independent committee has been appointed to assess the best path forward, with the primary objectives being to maximise shareholder value and minimise business disruption.

 

“By the end of the year (December), we expect to have clarity on which route we will choose,” he added. 

Freeze factors

 

> The board’s decision is in line with the recommendation made by the Independent Committee following a review of the business 

> The ice cream business is a high growth category and needs significant investment to realise its full potential 

> The business currently contributes to 3% of HUL’s turnover

> HUL also said that ice cream has a different operating model including cold chain infrastructure, and a distinct channel landscape