Magnum maker plans separation of ice cream business, targets €800 million in cost savings over three years

Unilever, the parent company of Hindustan Unilever (HUL), has announced its decision to split its ice cream unit, responsible for iconic brands like Magnum, as part of a significant restructuring initiative. This strategic move aims to streamline operations and enhance focus, with a target to divest the ice cream business into a standalone entity. Additionally, Unilever intends to eliminate approximately 7,500 positions, predominantly office-based roles, as part of a broader plan to achieve €800 million in cost savings over the next three years.

The Magnum ice cream manufacturer disclosed that various options would be explored for the separation, with a demerger leading to the creation of a new publicly listed entity being the most probable scenario. Unilever, renowned for brands such as Hellmann’s mayonnaise and Domestos cleaners, reported that its ice cream division recorded sales amounting to $8.6 billion in the year 2023.

This restructuring endeavour reflects Unilever’s commitment to revitalizing growth and optimizing its portfolio. The company will refocus its efforts on four core business segments: beauty and wellbeing, personal care, home care, and nutrition. Notably, rival Nestle SA previously undertook a similar strategy by establishing a joint venture with private equity firm PAI Partners to segregate its ice cream business.

The decision to separate the ice cream unit is anticipated to alleviate challenges for Unilever, particularly concerning controversies surrounding political positions taken by its subsidiary, Ben & Jerry’s. In December 2022, Unilever resolved a legal dispute with Ben & Jerry’s independent board, stemming from objections to product sales in the Israeli-occupied West Bank. Earlier that year, Unilever faced criticism from Ben & Jerry’s following a social media post denouncing US President Joe Biden’s military actions in Europe.

Analysts, including James Edwardes Jones from RBC Capital Markets, have expressed support for Unilever’s strategic move, citing potential benefits such as eliminating seasonal fluctuations in growth and reducing low-margin operations associated with the ice cream business. However, the projected completion of the separation by the end of 2025 suggests a challenging transition period ahead, coupled with disruptions stemming from a newly introduced productivity program.