Unilever to separate its ice cream biz, cut 7,500 jobs in restructuring bid

By Eric Pfanner
 

Unilever Plc plans to separate its ice cream business that includes brands such as Ben & Jerry’s as Chief Executive Officer Hein Schumacher streamlines the UK consumer-goods conglomerate by cutting 7,500 jobs. 
 

The company said a range of options will be considered for the separation, with a demerger that creates a new listed business the most likely option. Unilever, which also owns Hellmann’s mayonnaise and Domestos cleaners, said the ice cream division had sales of €7.9 billion ($8.6 billion) in 2023.

The move is part of a broader restructuring as Schumacher tries to jumpstart growth. Unilever said the job cuts, which will affect mainly office-based roles, are part of a plan to achieve €800 million in cost savings over the next three years.

Unilever rose 5.1 per cent in early London trading, leaving the shares down 2 per cent for the past year. 

Schumacher took over from Alan Jope last year after activist investor Nelson Peltz took a stake in the company and joined its board following a botched effort to buy GSK Plc’s consumer health division.

Four Businesses
 

The restructuring will leave the company focused on four businesses: beauty and wellbeing, personal care, home care and nutrition. Rival Nestle SA previously separated its ice cream business by setting up a joint venture with private equity firm PAI Partners.

Separating the ice cream unit will remove a headache for Unilever, which has had to deal with several controversies over political stances taken by Ben & Jerry’s.

In December 2022, Unilever settled a court battle with Ben & Jerry’s independent board after the brand objected to its products being sold in the Israeli-occupied West Bank.

In a separate incident earlier that year, Unilever criticized Ben & Jerry’s after it said in a social media post that US President Joe Biden was fanning “the flames of war” by sending troops to Europe, weeks before Russia invaded Ukraine.

“We believe a separation of ice cream makes sense given its slower profile and lack of cost synergies due to its cold supply chain,” said James Edwardes Jones, an analyst at RBC Capital Markets.

Cost Savings
 

If the proposed cost savings boost profits, the company will be able to reinvest in research and development and marketing, he said. 

Unilever’s revenue grew 4.7 per cent in the final quarter of 2023, just ahead of analysts’ estimates, as the volume of products sold increased for the first time since 2021. That followed a period when consumers, hit by the highest inflation in decades, were shifting away from branded products to buy more private-label goods.

After the separation of the ice cream business, which also includes the Magnum brand, Unilever said it’s aiming for mid-single digit growth in underlying sales, with a “modest margin improvement.”

What Bloomberg Intelligence Says:
 

“Unilever’s plan to separate out its Ice Cream arm for probable divestiture makes sense, removing seasonality from growth and a low-margin drag. Yet the end-2025 separation date suggests there’s a long and bumpy road ahead, combined with disruption from a new productivity program.”

Deborah Aitken, senior analyst

Schumacher, who joined Unilever from dairy cooperative Royal FrieslandCampina, in October set out a plan to revitalize growth at Unilever, pledging to focus investment on its top 30 brands, which represent around three-quarters of revenue.

Under Jope and his predecessor Paul Polman, the company had made the social “purpose” of its brands a key priority, drawing criticism from some investors who wanted to company to focus more on its bottom line. 

The separation of the ice cream business is expected to start immediately and should be complete by the end of next year, Unilever said.