Unilever, a multinational consumer goods company, recently announced its plan to undertake a cost-saving initiative by separating its ice cream unit, which houses popular brands such as Magnum and Ben & Jerry’s. This move will be accompanied by a reduction in the workforce of 7,500 jobs. The decision to undertake this initiative is in line with the company’s efforts to streamline its operations, optimize efficiency, and maximize profitability.
Investors reacted favorably to Unilever’s plan, causing the company’s shares to rise by almost 6% at one point. This development reaffirms its status as one of the largest consumer goods companies in the world. Activist investor Nelson Peltz’s fund, who is also a board member, and Unilever shareholder Aviva supported the plan.
The spinoff process is set to commence immediately, with completion anticipated by the end of 2025, as stated by Unilever, headquartered in London. CEO Hein Schumacher indicated flexibility regarding the listing location of the ice cream business during discussions with journalists, stating it’s “open to options” despite the move of its head office to Amsterdam.
Unilever aims to achieve mid-single-digit underlying sales growth and slight margin enhancement following the split. The ice cream segment currently contributes about 16% to Unilever’s global sales, with higher proportions in certain countries.
Furthermore, Unilever unveiled a cost-saving initiative targeting approximately 800 million euros ($869 million) over the next three years. This restructuring effort is expected to affect around 7,500 jobs globally, mainly office-based, with associated costs estimated to be around 1.2% of total turnover.
These job cuts represent about 5.9% of Unilever’s workforce of approximately 128,000 individuals. CEO Schumacher mentioned the restructuring would span across various organizational levels and regions but refrained from specifying the areas most affected.
This strategic move signifies a significant shift under CEO Schumacher’s leadership, who assumed the role in July, aiming to simplify the business and regain investor trust following a period of underperformance. The prior CEO, Alan Jope, faced criticism for allowing Unilever’s brand portfolio to expand to about 400, diverting attention from core performers.
Unilever’s underperformance prompted activist investor Peltz’s involvement, who secured a board seat in 2022 through his Trian investment vehicle. Trian, owning a 1.45% stake, expressed support for Unilever’s strategic initiatives.
Unilever’s stock surged nearly 6% in early trading, later stabilizing at a 3% increase by 1100 GMT, after experiencing a 5.8% decline over the past year.
Analysts view the separation of the ice cream division favorably, citing its historical volatility and margin dilution. Aviva’s Richard Saldanha termed it “great news for shareholders,” anticipating a positive market response.
In October, CEO Schumacher outlined Unilever’s focus on 30 key brands, which contribute to 70% of its sales, emphasizing improving gross margins and avoiding major acquisitions. Schumacher emphasized the company’s commitment to streamlining its workforce, asserting a busy agenda for the foreseeable future.
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