Unilever is planning to spin off its ice cream assets
Unilever is planning to spin off its ice cream assets
Unilever announced Tuesday it’s getting out of the ice cream business in what it’s describing as a de-merger. Brands like Breyers, Ben & Jerry’s and Magnum would be whisked away to form their own private stand-alone company, leaving Unilever a “simpler, more focused company.”
As it stands, Unilever owns brands as disparate as Axe body wash and Ben & Jerry’s, and that’s part of the problem.
“The supply chain logistics of ice cream is completely different,” said Matt Britzman, an equity analyst at Hargreaves Lansdown in the UK, where Unilever is headquartered.
Ice cream needs refrigerated trucks and refrigerated storage. Having all of that isn’t making Unilever any more efficient — it’s not like it can save on shipping by throwing the deodorant in the same freezer truck as the Chunky Monkey. Also, temperature isn’t the only cold thing about ice cream these days.
“So it’s actually been one of the lagging major business divisions over the last couple of years,” said Britzman.
Consumers have given ice cream inflation a frosty reception. At the same time, it’s more expensive than ever to make the stuff. So ice cream has joined a growing number of businesses Unilever is letting go.
“This is a classic corporate strategy for a public company,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.
“Public companies are under pressure to constantly grow,” he said. “If they don’t grow, people pay a lower price for the stock and a lower price for the stock means the CEO gets fired.”
So Unilever — and it’s new CEO — want to chop off the parts of the business that don’t add to growth and focus instead on what they’re best at. They are following in a long line of companies who’ve expanded only to shrink.
“You see all these rollups and acquisitions and everyone wants to get big,” said William R. Snow, a managing director at Focus Investment Banking.
“And so what do they do? Well, you need to diversify, and you create a behemoth, and then things get large and out of control and not as profitable,” said Snow.
So consumers screamed, supply chains screamed and Unilever said goodbye to ice cream.
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