Consumer goods giant Unilever said Tuesday it will cut 7,500 jobs and spin off its ice cream division, which includes Ben & Jerry's, in a bid to cut costs and simplify its brand portfolio.
Ian Meekins, the London-based company's chairman, said the move would create a “simpler, more focused and higher performing Unilever”. The group's ice cream division had sales of 7.9 billion euros ($8.6 billion) last year, accounting for about 13% of the group's total.
The division is home to Ben & Jerry's, which Unilever acquired in 2000, along with brands such as Cornetto, Magnum, Talenti and Wall's. The spin-off is expected to be completed by the end of 2025.
Hein Schumacher, who took over as Unilever's chief executive in July, announced plans last year to “drive growth and unlock potential”, including giving more attention to just 30 of the group's hundreds of brands. It was announced at the end.
He said Tuesday that the layoffs and ice cream spin-off will “accelerate” the plan and save nearly $870 million over the next three years. The cuts will be made in “primarily office-based roles” around the world, amounting to around 6 per cent of Unilever's workforce.
In early 2022, Nelson Peltz, one of Wall Street's most prominent activist investors, began investing in Unilever. Peltz, known for pushing companies to simplify their corporate structures, won a seat on Unilever's board later that year and remains there today.
Unilever's remaining divisions after the proposed spin-off would include health and beauty brands such as Dove soap, consumer goods such as surf detergent, and food brands such as Hellmann's Mayonnaise.
Unilever's rival Nestlé moved many of its European ice cream brands into joint ventures with private equity firms in 2016, and sold U.S. brands such as Dryer's and Haagen-Dazs to the same venture in 2019.
Unilever has struggled in recent years, with earnings growth supported by sharp price increases as sales decline. Inflation has led consumers to look instead to cheaper brands in many of Unilever's biggest categories, especially less essential products like ice cream.
The ice cream division faced the highest input cost inflation in Unilever's portfolio last year, the company said in its earnings call last month. Some of those costs were passed on to consumers, causing them to buy less or switch to cheaper brands, resulting in a “disappointing year with lower market share and profitability,” the company said. Stated.
“The company has been attempting to accelerate cost reductions to accelerate growth for at least a decade,” Bernstein analysts said in a research note. “This plan remains 'trying harder' or having more hope than experience to carry out the same plan,” they added. Unilever's shares rose 3% on Tuesday, but have remained roughly flat over the past year.
Ben & Jerry's, which has been run by an independent board of directors since its acquisition by Unilever, hasn't always rested on its laurels in the staid multinational portfolio. The Vermont-based brand's founders are outspoken about hot-button social and political issues. It has been announced that sales in the Israeli-occupied territories will end in 2021.
As a result, some US pension funds withdrew from Unilever, sparking shareholder lawsuits. Ben & Jerry's filed a lawsuit in 2022 to stop Unilever from selling its distribution rights to an Israeli licensee. Unilever eventually sold the rights to its long-time local partner, and the company continues to sell ice cream under a slightly different brand.