Unilever to spin off ice cream business
UNILEVER, THE company that makes Ben & Jerry’s ice cream, Dove soaps and Vaseline, said on Tuesday that it is cutting 7,500 jobs and spinning off its ice cream business to reduce costs and boost profits.
London-based Unilever said its ice cream business, which also includes Magnum bars, has “distinct characteristics” from its other brands and would benefit from separate ownership to increase growth. It said the split is expected to be completed by the end of next year.
The British consumer goods company with 128,000 employees also said it is launching a “productivity programme” that is expected to lead to a reduction of about 7,500 mostly office-based jobs worldwide.
Unilever said it will invest in technology to find efficiencies and avoid duplication that it anticipates will help it save €800 million (US$867 million) over the next three years. The company also laid off 1,500 staffers in early 2022.
“Simplifying our portfolio and driving greater productivity will allow us to further unlock the potential of this business, supporting our ambition to position Unilever as a world-leading consumer goods company delivering strong, sustainable growth and enhanced profitability,” said CEO Hein Schumacher, who took the helm at Unilever last summer.
The company’s shares jumped more than three per cent in late-morning trading on the London Stock Exchange on the announcement.
“The share price bounce goes some way in reversing what has been a difficult last year, as investors have fretted over a company with limited high growth prospects and in need of streamlining, despite its reputation as a solid defensive play,” said Richard Hunter, head of markets for interactive investor, an online investment service.
The company behind Hellman’s mayonnaise, Axe fragrances and Cif household cleaners said it is targeting underlying sales growth of mid-single digits after spinning off the ice cream business.
It saw sales volume drop 3.6 per cent in 2022 after jacking up prices 13.3 per cent on average across its brands that year. In response, it raised prices just 2.8 per cent last year, and sales rose 1.8 per cent.
Some analysts pointed out that splitting from Ben & Jerry’s, which is known for social activism that has put it at odds at times with its corporate owner, could have an added upside for Unilever. “A side benefit of the brand exiting Unilever's portfolio is, it might quieten the 'go woke and go broke noise, but more widely, the reasoning for the decision looks pretty sound," said Russ Mould, investment director at AJ Bell, a financial services company.
He noted that the ice cream spin-off had not been widely anticipated by the market, even if "political pronouncements from Ben & Jerry's had provoked a melt-down among some investors':
Ben & Jerry's has supported liberal issues like LGBTQ+ rights, Black Lives Matter, justice for migrants, and efforts to fight climate change.
The brand announced in 2021 that it would stop selling its ice cream in the Israeli-occupied West Bank and contested east Jerusalem - territories sought by the Palestinians.
Unilever later announced that it was selling its business interest in Ben & Jerry's in Israel to its Israeli licensee, which would market the products with Hebrew and Arabic labels. A US judge rejected a lawsuit in 2022 from Ben & Jerry's to block that plan.
More recently, since the Israel-Hamas war broke out, Ben & Jerry's independent board chair Anuradha Mittal has called for a permanent ceasefire in Gaza.