Hindustan Unilever Gets Board Nod To Separate Ice Cream Business
HUL's decision to separate its ice cream division comes as part of a portfolio restructuring to enhance its core focus on beauty, foods, and health categories.
Representative image. (Photo Source: Pexels)
Hindustan Unilever Ltd.'s board on Wednesday approved the separation of the company's cream segment as it does not significantly contribute to profitability. The details related to the separation plan are expected to be shared by 2024-end, according to an exchange filing.
HUL had formed a committee of independent directors in September to evaluate the option of separating the ice cream business. Based on the panel's recommendation, the board has decided to proceed with the separation plan, an exchange filing said.
The committee, which evaluated the plan, found that ice cream is a "high-growth category that needs significant investments to realise its full potential," HUL said in a release.
The panel also pointed out that ice cream has a different operating model, including cold chain infrastructure, and a distinct channel landscape, which limits synergies with the rest of HUL.
"Given Unilever owns the trademarks and know-how and has announced the separation of its ice cream business, local capabilities will need to be developed to continue running the business," the release said.
This portfolio restructuring will enable the company to sharpen its "focus on the core business" and "further strengthen its play in trending demand spaces such as beauty, foods, health, and wellbeing," the company said.
The move will also enable the ice cream business to operate with greater flexibility and focus, it said.
HUL further noted that its board, based on the recommendations of the independent committee, will "determine the mode of separation by the end of this year."
HUL's ice cream division—which includes Kwality Walls, Magnum, and Cornetto brands—forms a small fraction of its overall business. In fiscal 2023, ice creams contributed to 3% of HUL's revenue of Rs 58,154 crore. Ice creams do not significantly contribute to profitability, which suggests that the company should consider selling the business.
Unlike the home and personal-care categories where HUL is a dominant leader, the company trails Amul in the Indian ice-cream market. It also competes with various local and global brands, such as Vadilal, CreamBell, Mother Dairy, Naturals, Havmor, and Baskin Robbins.
Shares of HUL closed 0.9% lower at Rs 2,658 apiece on the BSE, compared to a 0.17% decline in the benchmark Sensex.
