Investors welcomed the plan, sending shares of Unilever, one of the world's largest consumer goods companies, up nearly 6% at one point.
Unilever said the plan would begin immediately and is expected to be completed by the end of 2025. The ice cream business is in the process of moving to a separate headquarters in Amsterdam, but CEO Hein Schumacher said he was “open to options” on where the ice cream business could be relocated.
The plan has been endorsed by activist investor and fund board member Nelson Peltz as well as Unilever Aviva shareholders.
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| Unilever stops ice cream business, cuts jobs to save costs. Photo: Reuters |
Unilever said it aims to achieve low-single-digit underlying sales growth and modest margin improvements after the split. The ice cream business accounts for about 16% of Unilever’s global revenue, and in some countries it accounts for a third or 40%.
Unilever, whose other brands include Dove soap, Marmite and Hellmann’s seasonings, has also launched a cost-saving programme worth around €800 million ($869 million) over the next three years. The proposed changes will impact around 7,500 jobs globally, mainly in offices, with the total restructuring cost expected to be around 1.2% of total revenue over the period.
The cuts will affect about 5.9% of Unilever's workforce of about 128,000 employees.
“ We are reviewing the entire organization, from headquarters, corporate centers, as well as the business group coordination points and business units in the countries, but there is no clear information yet on which areas will be most affected in terms of job cuts,” said Mr. Schumacher.
The move is a major statement by Mr Schumacher, who became CEO in July 2023. In October 2023, he outlined plans to restore investor confidence by simplifying the business after admitting that Unilever had underperformed in recent years. Unilever's previous CEO, Alan Jope, was criticised for allowing the group's brand portfolio to grow to around 400, distracting the board from the well-run, core revenue-generating businesses.
The underperformance has caught the attention of billionaire activist investor Peltz, who took a seat on Unilever’s board in 2022 through his Trian investment vehicle and has a track record of shaking up consumer goods companies. The fund, which owns 1.45% of Unilever, according to LSEG data, said on March 19 that it was “supportive of the strategic initiatives announced by Unilever.”
“ Nelson Peltz looks forward to continuing to work with the other members of Unilever’s Board as the company implements initiatives that increase long-term value for its stakeholders, ” Trian Partners said in a statement.
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Unilever said it will spin off its ice cream unit, which includes famous brands such as Magnum and Ben & Jerry's (Photo: Reuters/Andrew Kelly) |
Unilever shares rose nearly 6% in early trading and were up 3% by midday, but the stock has fallen 5.8% over the past year.
“ Ice cream is a pretty volatile business and it’s also been declining in terms of profitability, so we think strategically it makes sense, ” said Richard Saldanha, portfolio manager at Aviva, Unilever’s 17th-largest shareholder with a 0.5% stake.
“ It’s great news for shareholders in terms of the ice cream division because it has been a drag on the overall business for some time,” said Jack Martin, portfolio manager at Oberon Investments, which owns a small stake in Unilever. “The share price will react accordingly .”
In October 2023, Unilever CEO Schumacher said the company would focus on 30 core brands, which account for 70% of the company's revenue, work to improve gross margins and not make any large or transformational acquisitions.
“ We have a big agenda,” Mr Schumacher added. “It’s going to be a very busy time over the next 18 months .” He will not hesitate to downsize Unilever’s workforce.
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