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Unilever to spin off ice cream business, cut 7,500 jobs for cost savings

About 5.9% of global workforce to be cut to slash costs
Ben & Jerry’s, a brand of Unilever, is seen on display in a store in Manhattan, New York City, US on March 24, 2022. Reuters
Ben & Jerry’s, a brand of Unilever, is seen on display in a store in Manhattan, New York City, US on March 24, 2022. Reuters

Unilever said on Tuesday it would spin off its ice cream unit, home to popular brands such as Magnum and Ben & Jerry’s, and cut 7,500 jobs in a new cost-savings programme.

Investors cheered the plan, sending shares in Unilever, one of the world’s biggest consumer goods companies, up nearly 6% at one point.

The spinoff will begin immediately and is expected to complete by the end of 2025, London-listed Unilever said. The ice cream business is “in the process of moving to a separate head office in Amsterdam” but CEO Hein Schumacher said on a call with journalists that he was “open to options” regarding where it could list.

The plan was welcomed by activist investor and board member Nelson Peltz’s fund and by Unilever shareholder Aviva.

Unilever said it aims to deliver mid-single-digit underlying sales growth and modest margin improvement after the split. The ice cream business accounts for about 16% of Unilever’s global sales, and in some countries contributes a third or 40%.

The group, whose other brands include Dove soap, Marmite and Hellmann’s condiments, also launched a programme to save costs of around 800 million euros ($869 million) over the next three years. The proposed changes would impact around 7,500 jobs globally, mostly office-based, with total restructuring costs anticipated to be around 1.2% of overall turnover during the period.

The cuts will affect about 5.9% of Unilever’s workforce of about 128,000  people.

“We are looking across the organization, so in our head office, corporate centre, as well as in business group coordination points, as well as in business units in countries,” Schumacher said, but did not elaborate on which regions would be hit hardest by job cuts.

The move is a big statement from Schumacher, who became CEO in July and in October laid out plans to win back investor confidence by simplifying the business after admitting Unilever had underperformed in recent years. His predecessor Alan Jope was criticised for allowing the group’s brand portfolio to grow to about 400, leaving management distracted from its best performers.

Volatile business

The underperformance attracted the attention of billionaire activist investor Peltz, who took a seat on Unilever’s board in 2022 via his Trian investment vehicle and has a record of shaking up consumer goods companies. The fund, which owns a 1.45% stake according to LSEG data, told Reuters on Tuesday it “supports the strategic initiatives announced today by Unilever.”

“Nelson Peltz looks forward to continuing to work with the other members of Unilever’s Board as the company executes on initiatives to increase long-term stakeholder value,” Trian said in a statement.

Unilever’s shares jumped nearly 6% in early trading and were up 3% by 1100 GMT. The stock has dropped 5.8% over the past year.

“(Ice cream) has been quite a volatile business and has also been dilutive from a margin standpoint, so we think strategically this makes sense,” said Richard Saldanha, portfolio manager at Aviva, which is Unilever’s 17th biggest shareholder with a 0.5% stake.

“Great news for shareholders regarding the ice cream division as it has been a drag on the business as a whole for some time, share price should respond accordingly this morning,” Jack Martin, portfolio manager at Oberon Investments, which owns a small Unilever stake.

In October, Schumacher said the company would focus on 30 key brands which account for 70% of its sales, work on improving its gross margin and not undertake any major or transformational acquisitions.

Schumacher told Reuters last month that he would not shy away from streamlining Unilever’s workforce. “We have a big agenda,” Schumacher said on Tuesday. “This is going to be a very busy period for the next 18 months or so.”

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