Unilever, a prominent player in the food and beverage industry, has officially announced the spin-off of its ice cream divisions in India and Indonesia as part of a strategic demerger planned by the UK-based parent company. This significant move is aimed at unlocking value amidst evolving food and drink consumer trends.
The intention to separate Unilever’s global ice cream business into an independent, publicly listed entity was first revealed in March. Although several alternatives were considered, the FMCG giant confirmed its commitment to this split last week, signaling a firm direction amid ongoing discussions in the food and drink business landscape.
In a regulatory filing with the London Stock Exchange dated November 22, Unilever emphasized, “Unilever remains on track to deliver our comprehensive €800m ($840.5m) productivity programme and the separation of ice cream by the end of 2025.” This statement highlights the initiative’s importance within Unilever’s overall strategy and reflects broader trends in the food and beverage industry.
The separation will also involve Hindustan Unilever’s ice cream operations, which will be listed in the local market. This announcement was made on November 25, with plans awaiting board and shareholder approval early in the upcoming year. Concurrently, Unilever is exploring similar avenues for its Indonesian ice cream operations, as indicated by a separate statement discussing a “sale contract” with an internal holding company.
The board of Hindustan Unilever granted “in-principle approval” for the ice cream demerger during its recent meeting. According to reports, “subject to the necessary approvals and procedures to be followed in accordance with the applicable laws, it is proposed that the shareholders of HUL will receive shares in the new entity in proportion to their shareholding in HUL.”
In its evaluation, the board examined various options for separating the ice cream business, ultimately striving to maximize value for shareholders. Unilever stated, “The board has accorded in-principle approval to demerge the business,” underlining the intent to enhance shareholder value effectively.
The core ice cream brands in India, such as Kwality Wall’s, Cornetto, and Magnum, demonstrate “mid-to-high single-digit profitability.” By establishing a distinct, publicly traded entity, Unilever aims to provide focused management and greater flexibility in implementing strategies tailored to the unique demands of the ice cream market.
The statement further explained, “A separate listed entity will unlock fair value for HUL shareholders and give them the flexibility to stay invested in ice cream’s growth journey.” This approach signifies a strategic alignment with food and beverage industry trends focused on specialization and targeted growth.
In Indonesia, Unilever signed a “business transfer agreement” with PT The Magnum Ice Cream Indonesia, the intended purchaser, on November 22. This agreement indicates a closely knit relationship where the purchaser acts as the holding entity for Unilever’s ice cream segment.
The Indonesian announcement clarified that when fully implemented, the purchaser will no longer hold an affiliate relationship with the company. The transaction, estimated at Rp7 trillion ($440.2 million) for the assets, is subject to shareholder approval within a yet-to-be-scheduled meeting.
According to Unilever’s projection, the transferred business in Indonesia holds a market value exceeding Rp2.55 trillion and a net book value around Rp1.99 trillion. “Such a sale will enable the company to realise the value of its investment in the Indonesian ice-cream business and return such value to its shareholders in the short term,” the statement articulated.
Recent reports have downplayed the possibility of a private-equity sale for Unilever’s ice cream business, marking a shift in strategic options. While job cuts in Europe are indeed part of the FMCG giant’s productivity program, Unilever has indicated that “some roles will be transferred to ice cream” following the demerger.
This strategic move will position Unilever favorably amidst the dynamic landscape of food and beverage industry trends, allowing it to adapt effectively to emerging consumer demands and market opportunities.
