Is the world's largest ice cream IPO about to be born?

Author | Wang Xiaojun

Editor | Huang Yu

Summer has not yet arrived, but your favorite ice cream is already brewing a big move.

Recently, British consumer giant Unilever announced its financial report for 2024, one of the most 关注的消息 is its plan to spin off its ice cream business and conduct an IPO in Amsterdam, while also planning a secondary listing in London and New York.

The exchanges in these three locations are also the exchanges where Unilever is already listed. Unilever also stated that this IPO plan is expected to be completed in 2025.

Currently, Unilever's business portfolio mainly includes five major sectors: beauty and health, personal care, home care, food business, and ice cream. Among them, ice cream is the smallest segment, with sales of approximately €8.3 billion (about 63 billion RMB) last year, accounting for about 14% of the company's total revenue.

Although it does not account for a high proportion within the group, Unilever's ice cream business holds a 20% market share globally, owning five of the top ten global brands, including Cornetto, Magnum, and Wall's, making it a definite global ice cream giant.

Due to its size, Unilever's ice cream business was previously valued at £15 billion (about 140 billion RMB). If estimated based on the average price-to-earnings ratio in the consumer industry (about 25 times), its valuation could reach 107.5 billion RMB; adding brand assets and market share premiums, a valuation of 140 billion RMB is reasonable. If officially listed, it will become the largest ice cream IPO in the world.

The market has also shown enthusiasm for this large business. Last year, there were rumors about Unilever's potential sale of this business. At that time, it was reported that Unilever began contacting potential bidders regarding this business, involving a group of private equity firms such as Advent International, Blackstone Group, and CVC Capital. However, Unilever later decided to spin off rather than sell.

Unilever is currently eager to divest its ice cream business mainly because its own performance is under pressure, with sluggish growth over the past few years.

Its 2024 financial report shows that although annual sales increased by 1.9% year-on-year to €60.8 billion (about 462 billion RMB), operating profit fell by 3.7% year-on-year to €9.4 billion, and net profit shrank by 10.8% to €6.4 billion, showing a trend of "increased revenue without increased profit."

The ice cream business planned for spin-off is one of the segments with relatively weak growth within the group. In 2023, the ice cream business revenue grew only 2.3%, with growth mainly coming from price increases, while actual sales declined by 6%; although there was slight improvement in 2024, with revenue growth of 4.5% to €8.3 billion, profitability continued to be under pressure, becoming a "burden" that drags down overall performance After the spin-off, Unilever can concentrate resources on higher growth businesses such as beauty and health, improving overall operational efficiency.

Moreover, for Unilever, whose main business is in beauty and daily chemicals, the ice cream business lacks synergy with its core operations. The ice cream business has significant seasonal fluctuations, and supply chain and channel management differ greatly from other businesses (such as daily chemicals and food). Ice cream requires substantial investment in cold chain equipment, while Unilever's other businesses rely more on ambient logistics and retail channels. This difference in business models leads to insufficient synergy, and independent operations may respond more flexibly to market changes.

Optimizing the capital market strategy through a spin-off can allow for separate financing of the ice cream business, unlocking its brand value. After independent listing, this business can raise funds through the capital market, accelerate product innovation and regional expansion, while also creating higher returns for Unilever shareholders.

Unilever's spin-off of the ice cream business is a strategic choice of "amputation for survival." In the short term, it may boost stock prices by divesting inefficient assets, while in the long term, it depends on the operational capabilities after independence. Although the valuation of RMB 140 billion is not low, with its brand matrix and global layout, this business is expected to regain growth momentum under specialized operations.

In fact, in recent years, the giant Unilever has been "slimming down," and the spin-off of the ice cream business is just one of the measures.

Last year, Unilever sold its Elida Beauty business under the personal care segment, which includes over twenty non-core beauty and personal care brands such as Ponds and Impulse; subsequently, it sold off several other underperforming and relatively marginal brands.

Regarding a series of divestitures, Unilever stated that it would become a simpler and more focused company after the spin-off, concentrating on four segments: beauty and health, personal care, home care, and nutrition. After this "slimming down," Unilever indicated it would focus on its stronger 30 brands and allocate resources accordingly.

In addition, last year Unilever initiated its largest layoff in nearly five years, announcing it would cut 5.9% of its global workforce, affecting 7,500 people.

This is similar to many large companies globally. In recent years, as external uncertainties have increased, many global conglomerates have been shrinking their businesses, focusing on core operations to prevent being dragged down by marginal business investments in fierce competition, while ensuring sufficient funds to strengthen core businesses.

However, returning to the core does not mean entering a comfort zone; the global consumer market still faces significant challenges. Whether Unilever, with its slowing performance, can navigate through the cycle still requires new answers from the management.

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