Unilever has announced steps to accelerate its Growth Action Plan (GAP) through the separation of Ice Cream and the launch of a major productivity programme.

The Board believes that Unilever should be increasingly focused on a portfolio of unmissably superior brands with strong positions in highly attractive categories that have complementary operating models. This is where the company can most effectively apply its innovation, marketing and go-to-market capabilities. Ice Cream has a very different operating model, and as a result the Board has decided that the separation of Ice Cream best serves the future growth of both Ice Cream and Unilever.

Following separation, Unilever will become a simpler, more focused company, operating four Business Groups across Beauty & Wellbeing, Personal Care, Home Care and Nutrition. These Business Groups have complementary routes to market, and/or R&D, manufacturing and distribution systems, across both developed markets and Unilever’s extensive emerging markets footprint.

The separation of Ice Cream will assist Unilever’s management to accelerate the implementation of its GAP, announced in October 2023, which is focused on doing fewer things, better, with greater impact to drive consistent and stronger topline growth, enhance productivity and simplicity, and step up Unilever’s performance culture. In addition, Unilever will continue to optimise its portfolio within the four Business Groups towards higher growth spaces and through brands with global reach or significant potential to scale.

Separation of Ice Cream

The Unilever Board is confident that the future growth potential of Ice Cream will be better delivered under a different ownership structure. Ice Cream has distinct characteristics compared with Unilever’s other operating businesses. These include a supply chain and point of sale that support frozen goods, a different channel landscape, more seasonality, and greater capital intensity.

The separation of Ice Cream will create a world-leading business, operating in a highly attractive category, with brands that together delivered turnover of €7.9 billion in 2023. The business has five of the top 10 selling global ice cream brands including Wall’s, Magnum and Ben & Jerry’s, with exposure in both the in-home and out-of-home segments across a global footprint.

Under new leadership, Ice Cream is already making significant operational changes at pace that are expected to drive stronger performance. These include improved productivity and efficiencies, product rationalisation, and investment behind significant innovations.

As a standalone, more focused business, Ice Cream’s management team will have operational and financial flexibility to grow its business, allocate capital and resources in support of the company’s distinct strategy, including further optimising its manufacturing and logistics network, and developing wide-reaching, flexible, distribution channels over and above the changes that are currently under way in the business.

A demerger of Ice Cream is the most likely separation route, and in that case we expect the company to operate with a capital structure in line with comparable listed companies. Other options for separation will be considered to maximise returns for shareholders. The costs and operational dis-synergies relating to the separation of Ice Cream will be determined by the precise transaction structure chosen.

Separation activity will begin immediately, with full separation expected by the end of 2025. Further information will be provided in due course.
Launch of productivity programme

Building on the early momentum of GAP we have identified additional efficiencies that can now be accelerated. In addition to the portfolio changes, Unilever intends to launch a comprehensive productivity programme, driving focus and faster growth through a leaner and more accountable organisation, enabled by investment in technology.

The productivity programme is anticipated to deliver total cost savings of around €800 million over the next three years, more than offsetting estimated operational dis-synergies from the separation of Ice Cream. Incremental net savings from the programme beyond dis-synergies will provide flexibility for accelerated growth investments behind our brands and R&D, and support margin improvement over time.

The programme will further reduce complexity and duplication through technology-led interventions, process standardisation and operational centres of excellence to drive efficiencies.

The proposed changes are expected to impact around 7,500 predominantly office-based roles globally, with total restructuring costs now anticipated to be around 1.2% of Group turnover for the next three years (up from the around 1% of Group turnover previously communicated).

Enhanced medium-term guidance

The separation of Unilever and Ice Cream in combination with the productivity programme will ensure that Unilever’s financial and management resources are focused on its strongest, global or scalable brands.

These will have the capability to drive category expansion and deliver accelerated, sustainable levels of growth and improved profitability. After separating Ice Cream and implementing the productivity programme, Unilever will have a structurally higher margin. Post separation, Unilever aims to deliver mid-single digit underlying sales growth and modest margin improvement.

Ian Meakins, Chair of Unilever said: “The Board is determined to transform Unilever into a higher-growth, higher-margin business that will deliver consistently for all stakeholders. Improving our performance and sharpening our portfolio are key to delivering the improved results we believe Unilever can achieve.

“The separation of Ice Cream and the delivery of the productivity programme will help create a simpler, more focused, and higher performing Unilever. It will also create a world-leading ice cream business, with strong growth prospects and an exciting future as a standalone business.”

Hein Schumacher, CEO of Unilever said: “Under the Growth Action Plan we have committed to do fewer things, better, and with greater impact. The changes we are announcing today will help us accelerate that plan, focusing our business and our resources on global or scalable brands where we can apply our leading innovation, technology and go-to-market capabilities across complementary operating models.

“Simplifying our portfolio and driving greater productivity will allow us to further unlock the potential of this business, supporting our ambition to position Unilever as a world-leading consumer goods company delivering strong, sustainable growth and enhanced profitability.

“We are committed to carrying out our productivity programme in consultation with employee representatives, and with respect and care for those of our people who are impacted.” BY BOB KOIGI, African Business Community