Unilever announces plans to separate ice cream business

19th Mar 2024 07:23

(Sharecast News) - Unilever unveiled its latest move to expedite its growth action plan (GAP) on Tuesday, through the separation of its ice cream business and the introduction of a significant productivity programme.

The FTSE 100 consumer products giant said the decision to separate ice cream stemmed from its commitment to honing its focus on a portfolio of strong brands positioned in attractive sectors with complementary operating models.

Its board said ice cream had unique operational characteristics and a distinct supply chain, distribution channels, and seasonality, making separation the optimal strategy for unlocking the future growth potential of both ice cream and Unilever.

Post-separation, Unilever said it would streamline into four distinct business groups spanning beauty and wellbeing, personal care, home care, and nutrition.

The groups would leverage complementary routes to market and shared research and development, manufacturing, and distribution systems, aligning with Unilever's goal of delivering consistent and robust topline growth, enhancing productivity, and fostering a performance-driven culture.

Unilever said the separation of ice cream, expected to be completed by the end of 2025, aimed to create a world-leading business in a lucrative category, boasting brands including Wall's, Magnum, and Ben & Jerry's.

With a turnover of €7.9bn in 2023, ice cream would operate under new leadership, poised to implement operational enhancements including improved productivity, product rationalisation, and substantial innovations.

Unilever expected the demerger of ice cream, with a capital structure aligning with comparable listed companies, to be the most viable route for separation, although alternative options would be explored to maximise shareholder returns.

The company foresaw total cost savings of €800m over the next three years through its productivity programme, offsetting the separation costs.

It said the productivity programme aimed to drive leaner operations, accountability, and faster growth through technology-enabled interventions and process standardisation.

Although around 7,500 predominantly office-based roles were expected to be impacted globally, Unilever said it was committed to facilitating a smooth transition through consultation.

The board said that by separating ice cream and implementing the productivity programme, it projected a structurally higher margin post-separation, targeting mid-single digit underlying sales growth and modest margin improvement.

"Under the growth action plan we have committed to do fewer things, better, and with greater impact," said chief executive officer Hein Schumacher.

"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."

Schumacher said simplifying the portfolio and driving greater productivity would allow the company to "further unlock the potential" of the business, supporting its ambition to position Unilever as a world-leading consumer goods company with sustainable growth and enhanced profitability.

"We are committed to carrying out our productivity programme in consultation with employee representatives, and with respect and care for those of our people who are impacted."

At 0805 GMT, shares in Unilever were up 5.94% at 4,034p.

Reporting by Josh White for Sharecast.com.