Unilever continues to shed its burdens.
In a report titled "Package and Sell Over 20 Elida Beauty Brands, Unilever Continues to" Shake Off the Burden "in December last year, a reporter from the Huaxia Times mentioned," Isn't selling assets the first time, will it be the last time? "Now, Unilever has announced the spin off of its ice cream business and will lay off 7500 employees worldwide, and its actions have provided the answer.
Regarding the spin off of the ice cream business, official customer service personnel from Unilever China told reporters from the Huaxia Times that the ice cream business is still operating normally and has not yet received any information about the independent spin off.
"For Unilever now, its ice cream business is already lagging behind, so it will choose to focus on other sectors with higher gross profit and high growth." Chinese food industry analyst Zhu Danpeng said in an interview with a reporter from the Huaxia Times that splitting off its ice cream business may be Unilever's choice under streamlined operations, given underperformance.
From packaging and selling over 20 brands of Elida Beauty, to the current glass ice cream business and global layoffs, this international fast-moving consumer goods giant intends to go light hearted.
Spin off ice cream business
On March 19th, Unilever announced that it would spin off its ice cream business. The announcement states that the spin off will begin immediately and is expected to be completed by the end of 2025. Afterwards, Unilever's business will focus on four areas: beauty and health, personal care, home care, and nutrition.
For the specific reason for peeling off ice cream, Unilever revealed that the operating model of this business is different from Unilever's current business, including supply chain, channels, etc. At the same time, ice cream is also more affected by seasonal factors. Unilever's other businesses, whether in developed or emerging markets, complement each other in terms of market routes, research and development, manufacturing, and distribution.
Unilever is a leading player in this track, owning 5 of the world's top 10 ice cream brands in terms of sales, including Wall's and Snow, Magnum Mondragon, and Ben& Jerry's et al. Although Unilever's ice cream brands such as Heluko and Menglong are well-known to consumers, their performance has become a burden for Unilever.
According to the financial report, ice cream had the lowest growth rate among all Unilever businesses in 2023, with a revenue of 7.9 billion euros (approximately RMB 60.3 billion) and a basic sales growth of 2.3%. But this growth is mainly due to price increases. The financial report shows that Unilever's ice cream business increased pricing by 8.8%, while sales decreased by 6%.
"The performance of ice cream throughout the year has been disappointing, with market share and profitability continuously declining," Unilever also admitted in its financial report. And explain the reason for the decline in sales as the impact of poor weather conditions during the summer peak season (mainly in Europe) and consumer preference for cheaper products.
Hein Schumacher, the newly appointed CEO of Unilever, has publicly stated that the high business costs of the ice cream business due to the need for more freezer investment are "unacceptable". "With obvious mixed emotions, we have decided to spin off the ice cream business."
Sima Han reiterated that the business characteristics of ice cream are the need for cold chain, a completely different channel layout, and a unique seasonal sales model. In view of this, he believes that under a ownership structure that is more in line with its business characteristics and market position, the ice cream business can thrive.
"Our current default route is to spin off the ice cream business and list it separately," he said. "From a historical perspective, Unilever has always been an Anglo Dutch company. We currently manage our food and ice cream business in the Netherlands and the rest of our business in London. This does not mean that ice cream will be a Dutch or UK (listed) company in the future. We are considering all options."
In fact, as early as the performance report meeting in February, Sima Han revealed that Unilever had made "significant adjustments" to its ice cream business, including large-scale management adjustments, cost streamlining, and product portfolio changes. It is expected that the revenue and profits of ice cream will improve in 2024.
However, while the ice cream business is seen as a sought after opportunity by many food companies, it has become a burden in the hands of Unilever.
Continue to shake off the burden
Frequent divestitures are seen in the industry as Unilever's response to weak performance by shedding the burden.
On February 8th, Unilever announced its performance for the fiscal year ended December 31st, 2023, with a revenue of 59.60 billion euros, compared to 60.07 billion euros in the same period last year, and analysts expected 59.88 billion euros; The net profit attributable to shareholders was 6.49 billion euros, equivalent to a profit per share of 2.56 euros. The market expectation was 2.62 euros, compared to 7.64 billion euros in the same period last year, equivalent to a profit per share of 2.99 euros.
From a regional perspective, Unilever distinguishes its main business into Asia Pacific and Africa, the Americas, and Europe. In the 2022 full year financial report, the Asia Pacific non regional sales accounted for 46% of the group's share, which decreased to 44% in 2023, but remained the group's largest market.
In fact, there have been signs of weak performance at Unilever for a long time. Looking at the timeline, according to publicly available data, Unilever's revenue remained around 51 billion to 52 billion euros from 2018 to 2021, with slow growth. In 2022, Unilever's revenue increased by 14.5% to 60.1 billion euros (approximately RMB 438.147 billion); The net profit attributable to the common shareholders of the parent company was 2.905 billion euros, a year-on-year decrease of 6.92%. In 2022, its revenue reached 60.1 billion euros, but more due to price increases.
Perhaps to boost performance, Unilever has repeatedly slimmed down. In addition to the current spin off of the ice cream business, on December 19th last year, Unilever announced on its official website that it had received a binding offer from American private equity firm Yellow Wood Partners LLC to acquire Elida Beauty, which is expected to be completed by mid-2024.
Not only that, Unilever Group also announced on March 19th this year that it will lay off 7500 employees worldwide, mainly related to office related positions.
Zhu Danpeng believes that international food giants such as Unilever, Nestle, and Danone are currently focusing on these development directions: first, high-tech, second, industry barriers, third, high gross profit, and fourth, high growth. Except for these four sectors, other traditional businesses will gradually be divested.
Regarding the large-scale layoffs at Unilever, Jiang Han, a senior researcher at Pangu Think Tank, analyzed to our reporter that behind the massive layoffs, Unilever may face various difficulties such as performance pressure, rising costs, and market competition. With the continuous changes in the global economy and the increasing diversification of consumer demand, companies need to constantly adjust and optimize their business structure to adapt to market changes. In this process, layoffs may be a necessary means to reduce costs, improve efficiency, and optimize resource allocation.
In his view, Unilever, as a multinational enterprise with a long history and rich experience, has strong brand strength and market foundation. If a company can accurately grasp market trends, actively innovate, and continuously optimize its business structure, then its future development is still worth looking forward to.
Jiang Han gave his suggestion: Unilever should continue to strengthen the development of its core business, enhance brand value and market competitiveness; At the same time, actively exploring new growth points and expanding new business areas to achieve sustainable development. In addition, the company should also focus on talent cultivation and introduction, providing strong talent support for the long-term development of the enterprise.
Our reporter will continue to pay attention to the extent to which Unilever's lightweight deployment in the next century can achieve significant results.