Unilever’s Ice Cream Business Demerger: A Strategic Shift with Far-Reaching Implications

Unilever, the London-based consumer goods giant, has announced a significant strategic move: the demerger of its sprawling ice cream business, which will be primarily listed on the stock market in Amsterdam later this year. This decision, revealed alongside the company’s 2024 financial results, has sparked interest and debate across the business and political landscapes. While the demerger is part of Unilever’s broader strategy to streamline its operations and focus on core brands, it also carries implications for the City of London’s efforts to retain its status as a global financial hub.

A Blow to London’s Financial Ambitions

The announcement has been interpreted as a setback for the UK government, particularly Chancellor Rachel Reeves, who reportedly lobbied Unilever to consider London as the primary listing location for the ice cream business. Reeves met with Unilever’s CEO, Hein Schumacher, as part of a broader effort to revive the City’s post-Brexit appeal, especially in attracting major flotations. Business Secretary Jonathan Reynolds acknowledged the decision, stating that while progress has been made, more work is needed to enhance the competitiveness of the UK’s financial markets. Despite this, Unilever has made it clear that Amsterdam will serve as the primary listing location, although the demerged stock will also be traded in London and New York.

The Ice Cream Business: A Global Powerhouse

The ice cream division being spun off is no small operation. It boasts five of the world’s top 10 ice cream brands, including household names like Ben & Jerry’s, Wall’s, and Magnum. In 2024, the business generated £6.9 billion in sales, underscoring its significant contribution to Unilever’s revenue. The decision to demerge this division was first floated nearly a year ago, but the details of how it would be executed remained unclear until now. By separating the ice cream business, Unilever aims to allow it to thrive independently, with a singular focus on growth and innovation.

Strategic Streamlining: Unilever’s Path to Simplification

Unilever’s broader strategy is centered on simplifying its portfolio and narrowing its focus to a smaller number of high-performing brands. The company has made it clear that it wants to "own fewer, better brands" and concentrate on running its operations more efficiently. This approach is part of a larger transformation effort, which includes cost-cutting measures and a drive to bolster profitability. Last year, Unilever announced plans to cut 7,500 jobs globally as part of this initiative. By spinning off the ice cream business, the company hopes to unlock its full growth potential and create a more agile, responsive organization.

Financial Performance and Market Reaction

The announcement of the demerger coincided with the release of Unilever’s 2024 financial results, which showed mixed performance. While the company achieved underlying sales and volume growth during the year, net profits fell by nearly 11%, attributed to significant investments in turnaround plans and losses from disposals. Despite a 6% increase in dividends and a share buyback, Unilever’s London-listed shares dropped by more than 6% following the news. Analysts pointed to the challenging financial climate for consumers as a key factor in the expected tough first half of 2025, which likely contributed to the market’s tepid response.

Conclusion: A New Chapter for Unilever and the City of London

Unilever’s decision to demerge its ice cream business and list it primarily in Amsterdam marks a significant turning point for the company and the City of London. While the move aligns with Unilever’s strategic goals of simplification and growth, it also highlights the ongoing challenges faced by London in attracting and retaining major listings in a post-Brexit world. As Unilever continues to reshape its business, the success of this demerger will be closely watched by investors, analysts, and policymakers alike. The outcome could have far-reaching implications for the future of the company, the City of London, and the broader economy.