Fast-moving consumer goods (FMCG) giant Unilever is separating its ice cream business and plans to cut around 7,500 jobs globally under a major productivity programme, which is expected to deliver around €800 million in cost savings over the next three years.
Unilever is a major player in the ice cream business globally and has five of the top ten selling brands like Wall's, Magnum and Ben & Jerry's. The separation of ice cream will create a world-leading business, operating in a highly attractive category, with brands that together delivered a turnover of €7.9 billion in 2023, Unilever said in a statement.
"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 Unilever board is confident that the future growth potential of ice cream will be better delivered under a different ownership structure," it said.
Activity to separate the ice cream business will begin immediately, with full separation expected by the end of 2025, it added. A demerger of the ice cream business into a new entity will be the most likely separation route.
Post spin-off of the ice cream business, Unilever will become a simpler, more focused company, operating four business groups across beauty and well-being, personal care, home care and nutrition.
"The separation of ice cream and the delivery of the productivity programme 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 standalone business," noted Ian Meakins, chair of Unilever.
The maker of Dove soaps and Surf detergent said the separation of ice cream will help its management accelerate the implementation of growth action plan (GAP), which it had announced in October 2023 and focuses on doing fewer things better. Furthermore, Unilever intends to launch a comprehensive productivity programme, driving focus and faster growth through a leaner and more accountable organisation, enabled by investment in technology.
The productivity programme is anticipated to deliver total cost savings of around €800 million over the next three years, which Unilever said will more than offset estimated operational dis-synergies from the separation of ice cream. The proposed changes, though, are expected to impact around 7,500 predominantly office-based roles globally, with total restructuring costs now anticipated to be around 1.2 per cent of group turnover for the next three years, compared with 1 per cent estimated earlier.
The productivity programme will be carried out in consultation with employee representatives, the company said.
Unilever's Indian unit Hindustan Unilever (HUL) sells the Wall's and Magnum brands in India. In the latest October-December quarter, the ice cream business grew in mid-single digits on a high base, HUL said. Overall, HUL reported a revenue of Rs 3,733 crore in the foods and refreshment segment in the December quarter, up from Rs 3,700 crore in the year-ago quarter.
Hindustan Unilever said it is evaluating various options for the Indian ice cream business in light of Unilever's announcement to spin off the ice cream business globally.
"We will discuss this with the HUL board and Unilever management in the coming months. Once the approach is finalised, we will communicate further," it said.
According to HUL, ice cream contributed to 3 per cent of its revenue in the 2022-23 financial year.
HUL further said it has been already running a cost savings programme called Symphony for many years now and has been generating gross savings of 6 per cent of turnover every year.
The company will closely assess the global initiatives of Unilever under the productivity programme and assimilate best practices to take Symphony to its next phase, it added.
