Board decides separation best serves future growth of the company.

March 20, 2024

4 Min Read

Unilever said this week that it is accelerating its Growth Action Plan (GAP) by separating its ice cream business out as a stand-alone business and launching a major productivity program.

The board 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.

According to the company, the ice cream business has a very different operating model, and as a result, the board has decided that separating the business off best serves future growth.

Following separation, Unilever will become a simpler, more focused company, operating four business groups across Beauty & 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 separation of the ice cream business 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, enhance productivity and simplicity, and step up Unilever’s performance culture. In addition, Unilever will continue to optimize its portfolio within the four business groups towards higher growth spaces and through brands with global reach or significant potential to scale.

“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,” said Ian Meakins, chair of Unilever. “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 stand-alone business.”

Separation of ice cream

The Unilever board is confident that the future growth potential of the ice cream business will be better delivered under a different ownership structure. Ice cream has distinct characteristics compared with Unilever’s other operating businesses. These include a supply chain and point of sale that support frozen goods, a different channel landscape, more seasonality, and greater capital intensity.

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 business has five of the top 10 selling global ice cream brands including Wall’s, Magnum and Ben & Jerry’s, with exposure in both the in-home and out-of-home segments across a global footprint.

Under new leadership, the ice cream business is already making significant operational changes at pace that are expected to drive stronger performance. These include improved productivity and efficiencies, product rationalization, and investment behind significant innovations.

As a stand-alone, more focused business, ice cream’s management team will have operational and financial flexibility to grow its business, allocate capital and resources in support of the company’s distinct strategy, including further optimizing its manufacturing and logistics network, and developing wide-reaching, flexible, distribution channels over and above the changes that are currently under way in the business.

A demerger of the ice cream business is the most likely separation route, and in that case, the company expects 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.

Separation activity will begin immediately, with full separation expected by the end of 2025. Further information will be provided in due course.

Launch of productivity program

Building on the early momentum of GAP we have 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 the ice cream business. 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. The program will further reduce complexity and duplication through technology-led interventions, process standardization and operational centers of excellence to drive efficiencies.

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.

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