Consumer group aims for €800mn of cost savings as it separates division
Unilever is to split off its ice cream business and cut 7,500 jobs as new chief executive Hein Schumacher tries to deliver on his promise to turn around the performance of one of the world’s largest consumer goods groups.
Setting out the measures on Tuesday, Unilever said that the ice cream division, home to brands including Wall’s, Magnum and Ben & Jerry’s and accounting for 16 per cent of overall sales, would be better as a standalone business.
Schumacher, who since taking the top job last July has been under intense pressure to shake up Unilever after several years of lackluster growth, said that the ice cream business would probably be listed but that no final decision on how it would be separated had been taken. The group was “open to options” on where the business, which is in the process of moving to an office in Amsterdam, could be listed, Schumacher added. The business currently operates from Rotterdam, alongside the food division. Jettisoning ice cream will leave Unilever with four businesses covering beauty and wellbeing, personal care, home care and nutrition.
The combination of Unilever’s sprawling operations — the group also makes Marmite, Hellmann’s and Dove soap, as well as cleaning products Domestos and Cif — and sluggish growth attracted the interest of billionaire activist Nelson Peltz, who agitated for changes. Alongside the plan for the ice cream business, Unilever on Tuesday also said it would deepen cost-cutting measures and was targeting €800mn of savings over the next three years. About 7,500 jobs will be axed as part of the programme, with the majority “office-based”. Unilever, which employs about 128,000 people, did not say where the jobs would be cut or from which functions. Fernando Fernández, Unilever’s new chief financial officer, said that the group was implementing a “comprehensive technology programme” as part of the cost savings and that AI would play a role.
Analysts welcomed the decision on the ice cream business, which is by far the largest step taken by Schumacher since he took over from Alan Jope. RBC Capital analysts noted: “We believe a separation of ice cream makes sense given its slower growth profile and lack of cost synergies due to its cold supply chain.” Shares in Unilever rose 5 per cent in early trading on Tuesday. Barclays estimates that the ice cream business could be worth €17bn and puts Unilever’s market share at 20 per cent, making it the industry leader. However, as well as the ice cream division having lower margins than other parts of the business, Ben & Jerry’s has also proved troublesome for Unilever’s management. Ben & Jerry’s, which has had an independent board since it was acquired by the Anglo-Dutch company, has repeatedly clashed with Unilever over the ice cream brand’s stance on Israeli politics. Laying out the reasons for exiting the ice cream business, Unilever pointed to the lack of overlap on supply chains with rest of the company and said that it was also more seasonal.
The company intends to complete the separation by the end of next year. Following the separation of the ice cream business and the additional cost savings, Unilever would have a “structurally higher margin”, the company said. Unilever’s former chief executive, Jope, drew the ire of investors for a series of mis-steps, most notably a botched bid in 2021 for GSK and Pfizer’s consumer health business.
Source; Financial Times
