Unilever PLC has announced its plan to separate its ice cream business through a spin-off, in a move that will accelerate its Growth Action Plan (GAP). Unilever (stub) will focus on its four main business units: Beauty & Wellbeing, Personal Care, Home Care, and Nutrition, while the new standalone entity, NewCo, will operate as a world-leading ice cream business. The separation is aimed at simplifying Unilever’s portfolio and delivering cost savings of €800 million over the next three years, with the process expected to be completed by the end of 2025.
The Ice-cream business has been struggling to meet sales expectations, leading to the decision to separate it from Unilever’s other successful business units. The new leadership team, headed by Peter ter Kulve, is focused on enhancing operational control and productivity within the ice cream business. Unilever has indicated a demerger as the likely route for separation, with plans to establish a newly listed public entity headquartered in Amsterdam. Details about the separation are still forthcoming.
Unilever’s Growth Action Plan (GAP), introduced in October 2023, is aimed at prioritizing fewer tasks, executing them better, and amplifying their impact. The plan focuses on delivering higher quality growth, stepping up productivity and simplicity, and adopting a strong performance focus. Actions under this plan are expected to manifest progressively throughout 2024, in line with the separation of the ice cream business.
Unilever operates in five business segments, with the ice cream segment contributing 13.0% of group turnover. While the other business units have shown positive growth momentum, the ice cream segment has faced challenges due to consumer preferences for alternative offerings and unfavorable seasonal conditions. Following the separation from the ice cream business, Unilever will concentrate on allocating capital and resources towards its top 30 brands, improving their growth prospects and profitability.
Unilever’s ice cream business holds a dominant position in the €80 billion global ice cream market, with renowned brands like Ben & Jerry’s, Cornetto, and Magnum contributing to the majority of its revenue. The ice cream segment operates on a seasonal basis, with high distribution costs and carbon footprints. By separating the ice cream business, Unilever aims to enhance the profitability and growth of its more resilient and scalable brands, ultimately driving sales growth and improved profit margins by 2026.
In its latest financial results for the fourth quarter of 2023 and fiscal year 2023, Unilever reported varying performance across its business segments, with underlying sales growth in most segments. The company’s total sales were impacted by currency fluctuations, while improved gross margins and adjusted operating profit were noted. Unilever’s strategic move to separate its ice cream business is expected to streamline its portfolio, improve operational efficiency, and focus on high-growth brands for sustainable revenue growth in the future.
