Nestle, the world's largest food corporations, is considering selling its ice cream division. About seven years after selling its U.S. ice cream business, including Haagen-Dazs, it appears ready to pull out of its remaining ice cream operations as well.
According to CNN and other foreign media, on the 19th (local time) Nestle said it is in "in-depth negotiations" to sell its remaining ice cream business to joint-venture partner Froneri. Nestle owns six ice cream brands, including Haagen-Dazs, Drumstick, and Movenpick.
Froneri is a joint venture established in 2016 with 50-50 equity between Nestle and European private equity firm PAI Partners. In 2019, Nestle sold its U.S. ice cream business to Froneri for $4 billion (about 5.8 trillion won).
The sale of the ice cream business is being pursued as new Chief Executive Officer (CEO) Philippe Navratil reexamines the company's overall business structure. Navratil was brought in to tackle years of poor results after his predecessor, CEO Laurent Freixe, was dismissed over internal issues. He also carried out a restructuring of 16,000 employees immediately after taking office in Sep. last year.
In its annual results, Nestle said it would focus on four core businesses: coffee, pet food, nutrition, and food and snacks. In a statement, Navratil said, "We are concentrating the portfolio on four businesses around the strongest brands."
Nestle's reason for seeking to scale back its ice cream business is the business's unique operational demands. Ice cream has large seasonal swings in demand, and it must be distributed frozen, which makes building and maintaining the supply chain costly in expense.
CNN noted, "Nestle is not the first major consumer goods corporations to unwind an ice cream business burdened by thorny challenges such as seasonal demand swings and building a frozen-products supply chain," citing Unilever as an example. Nestle rival Unilever spun off its ice cream division late last year and established "Magnum Ice Cream." Magnum owns brands such as Ben & Jerry's and Cornetto.
According to Reuters, Nestle's ice cream business currently generates about 1 billion Swiss francs (about 1.9 trillion won) in annual sales in Canada, Chile, Peru, Malaysia, China, Thailand, and elsewhere. Navratil said, "Sometimes you have to step away from a business in order to focus," and described the ice cream business as "solid but small in scale and not a strategic priority for us."
Moreover, Nestle recently has had to focus on risk management because of an infant formula recall. Last month, after a sample taken in Dec. last year tested positive for the toxic substance cereulide, Nestle recalled certain infant formula products sold in dozens of countries, including France and the United Kingdom.