Tuesday saw the announcement by Unilever that it was going to spin off its ice cream business — home to well-known brands such as Ben & Jerry's and Magnum — and reduce 7,500 jobs as part of a new cost-cutting strategy.
Reactions to the plan were positive, as shares of Unilever, one of the largest consumer goods companies worldwide, surged by about 6% at one point.
According to London-listed Unilever, the spinoff would start as soon as possible and be completed by the end of 2025. Although the ice cream division is in the process of transferring to a different head office in Amsterdam, CEO Hein Schumacher said during a meeting with the journalists that he would welcome suggestions for where it may list.
Both Aviva, a stockholder in Unilever, and Nelson Peltz's fund, a board member and activist investor, cheered the plan.
Unilever said that after the split, it hopes to gain modest improvement in margins and mid-single-digit underlying growth in sales. The ice cream sector accounts for around 16% of Unilever's global revenues, and in some nations, that number can reach as high as 40%.
The corporation, which also owns the Marmite, Hellmann's condiment, and Dove soap brands, announced plans to reduce spending by approximately 800 million euros, or $869 million, over the next three years. The planed changes would affect about 7,500 workers globally, mostly in offices. It is expected that, during that period, the entire cost of restructuring will be 1.2% of overall turnover.
Of Unilever's around 128,000 employees, 5.9% will be influenced by the layoffs.
Schumacher said that they are searching throughout the organization, including in business units in each country, corporate centers, head offices, and business group coordination points. However, they did not go into detail about which regions would be most affected by the layoffs.
This is a big move for Schumacher, who became CEO in July and, after admitting that Unilever had not done well in recent years, announced measures to restructure the business in October to win back investor confidence. The group's portfolio of brands increased to around 400 under the leadership of his predecessor, Alan Jope, who was criticized for taking management's focus away from the company's best performers.
Volatile business
Peltz, a wealthy activist investor, noticed the underperformance and asked for a seat on Unilever's board in 2022 through his Trian investment company. As per LSEG statistics, the fund holds a 1.45% stake. On Tuesday, it said that it is in favor of the strategic plans that Unilever has revealed.
Nelson Peltz is eager to collaborate with the other Unilever board members as the company carries out plans to enhance stakeholder value in the long term, according to a statement released by Trian.
Early trading saw a roughly 6% increase in Unilever's shares, which rose 3% by 1100 GMT. Over the previous year, the stock fell 5.8%.
The strategic rationale for this decision, according to Richard Saldanha, a portfolio manager of Aviva, which holds a 0.5% position in Unilever and is the company's 17th largest shareholder, makes sense because the ice cream industry has historically been highly volatile and dilutive from a margin perspective.
In October, Schumacher declared that the business would emphasize on 30 core brands that contribute 70% to its sales and seek to grow its gross margin, rather than making any big or revolutionary acquisitions.
Additionally, Schumacher declared last month that he would not think twice about cutting Unilever's workforce. And on Tuesday, he said that they have a busy schedule for the following 18 months or so.