Unilever moves forward with ice cream spinoff, invests in fewer, better innovations to drive growth

“We believe that the separation of ice cream makes sense both for Unilever and for a stand-alone ice cream business,” CFO Fernando Fernandez said at the Deutsche Bank Global Consumer Conference.

He spoke highly of the potential for the ice cream business, which brought in $8.57 million in sales in 2023 and saw Q1 unit sales increase 2.3% year-over-year, but described it as a “clear outlier in our portfolio.”

He explained the ice cream business had “different channels, different routes to market and much higher capital intensity, and a different margin structure and cash conversion” than other parts of Unilever’s diverse business, which includes a handful of well-known and emerging nutrition brands, such as Knorr, Hellmann’s and Liquid I.V., as well as recognizable brands in beauty & wellbeing, personal care and home care.

Separating the ice cream business, an idea that was originally floated in March to broad investor support, would give the ice cream business the “the flexibility to pursue a distinct strategy as a world-leading stand-alone ice cream business with some of the most power, the best brands in the industry,” Fernandez said.

He added it would leave Unilever “with a more focused business better able to leverage our innovation, marketing and go-to-market capabilities across businesses with complementary operating models.”

Unilever plots to ‘close the gap between our performance and our full potential’​The separation is in line with the new management’s Growth Action Plan, which “is designed to close the gap between our performance and our full potential, as well as opening or extending gaps versus competition where we are ahead already,” said Hain Schumacher, who officially took the helm of Unilever as CEO last July 1 after a month as CEO designate.

He explained “the GAP, as it is known internally,” is “underpinned by a very simple mantra, which is, doing fewer things better and with greater impact.”

The plan centers on three priority areas: delivering faster and higher quality growth, creating a more streamlined and productive business and “dialing up the performance edge in our culture,” Schumacher said.

Since the GAP was first announced in October, “we have been implementing the plan at speed,” Schumacher said.

He pointed to early successes, including strong growth of the company’s “power brands,” which including Knorr, Hellmann’s, Liquid I.V., and several of the soon-to-be divested ice cream brands.

By giving these brands “first call on incremental investment and increased resources,” they grew underlying sales by 6.9% and increased volume 2.7% and 210 basis points ahead of the group in the second half of 2023, Schumacher said.

He added, “In quarter one of this year, they continued to deliver underlying sales growth slightly above the 6% mark. In a lower inflation environment, and that’s important, they stepped up volume growth to 3.8%, once again, significantly ahead of the group. And as a result, these brands have gone from representing about 70% of our turnover at this time last year to now 75% of our turnover.”

Unilever’s selective approach to innovation based on “less is more” approach​Innovation remains an essential “growth acceleration lever” for the company, but going forward Unilever will be more selective and supportive of the innovations it pursues, said Schumacher.

“We have been spread too thinly in the past and that precludes the kind of consistent execution that is key to success. And therefore, our acceleration plan is built around scalable platforms with differentiated technologies that drive category growth, but also extend the time horizons. We’re going for multiyear innovation programs with a strong focus on new benefits and new formats, as opposed to relaunches or extensions of existing ranges, and a better use of our strong and, I believe in many cases, world-leading science and technology platforms,” he explained.

Unilever also will focus more on the “classic 6Ps” – including product, packaging, proposition, promotion, place and pricing – to ensure its brands are “unmissably superior” and can win “across multiple dimensions,” Schumacher added.

He explained the six ‘p’s of each brand will be evaluated against 21 input metrics, all of which will have “bespoke weighting” at country and category level.

Leadership incentives help ‘dial up’ performance​Unilever also is driving growth by “dialing up the performance edge in our culture” by appointing a new leadership team and offering enhanced incentives, Schumacher said.

Since he took over as CEO, more than 60% of the executive team has changed – either internally promoted or externally recruited, so that “years of valuable Unilever experience are being combined with fresh perspectives,” he said.

Their performance will be linked to rewards through a remuneration policy “better aligned with shareholder interests,” streamlined and systematized individual goal setting and “greater line of sight and differentiation for employees,” according to the company’s presentation.

Schumacher added, “We are dialing up in-year performance and once again by doing fewer, bigger things really well and by holding people to account. And together, these represent important shifts in the way that we think about and approach performance management. And I expect to see them becoming increasingly evident in our results over time.”