Fast-moving consumer goods (FMCG) giant Hindustan Unilever Limited (HUL) has announced its plan to demerge its ice cream business into an independent listed entity. Shareholders of HUL will receive shares in the new entity proportional to their existing shareholding. The move aims to provide focused management and unlock value for shareholders by creating a standalone ice cream company.
Why the Demerger?
HUL’s ice cream portfolio, which includes iconic brands like Kwality Wall’s, Magnum, and Cornetto, currently contributes around 3% to its revenues. The demerger is intended to:
- Focus on Market Dynamics: Enable specialized strategies suited to the growing demand for premium ice creams.
- Unlock Shareholder Value: Provide investors with direct exposure to a rapidly growing sector.
- Accelerate Growth: Leverage focused management for the ice cream business to achieve its full potential.
HUL stated that the standalone entity would have greater flexibility to respond to market trends and enhance its competitive positioning.
India’s Ice Cream Market
The Indian ice cream market is projected to surpass $5 billion by FY25, driven by:
- Increasing demand for premium products like HUL’s Magnum brand.
- Growth in in-home consumption through online platforms.
HUL has been outperforming the market in the premium segment, as highlighted in its FY24 annual report, where it noted that its premium ice cream brands are growing significantly faster than the overall category.
Competition Landscape
HUL faces tough competition from both local and global players, including:
- Domestic Brands: Amul, Mother Dairy, Vadilal, Naturals.
- Global Brands: Baskin Robbins.
The demerger will help HUL focus on this competitive market with a dedicated management team.
Analysts’ Perspective
Market analysts view the demerger as a positive step, suggesting that it will:
- Allow existing investors to benefit from a pure-play ice cream entity.
- Attract new investors seeking exposure to the rapidly growing premium ice cream market.
Next Steps
The demerger is subject to:
- Approval by HUL’s board and shareholders.
- A detailed scheme of demerger to be reviewed in early 2024.
This move aligns with parent company Unilever’s global strategy of separating its ice cream business into independent units across markets.
