The London-based food products giant said on Thursday that ice cream is no longer a priority in its strategy, and it is now in active talks to sell the remainder of its ice cream business through the Froneri joint venture.
The unit, which brings together the Häagen-Dazs and Drumstick brands, is valued at nearly 1 billion Swiss francs (about $1.3 billion). The company plans to transfer these brands from the United Kingdom to Froneri over the next year, while keeping its stake in the joint venture.
Following the news, Nestlé’s shares in early trading in Zurich rose about 3%, but later pared the gains.
The move comes amid the efforts of new chief Philip Navratil to increase sales and simplify the company’s complex operating structure. Navratil took over after the resignation of Laurent Freixes in September for failing to disclose a romantic relationship with a younger colleague.
In its annual report Nestlé said it would focus on four core areas: coffee, pet care, nutrition, and snacks.
“We are focusing our portfolio on four areas led by our strongest brands.”
– Philip Navratil
“We kept these six brands because we thought we could drive growth, but they do not have global scale. We cannot drive growth the way Froneri can.”
– Philip Navratil
The Froneri Story and Market Context
Froneri was formed more than a decade ago as a joint venture between Nestlé and the British ice cream maker R&R. In 2019, Nestlé sold Froneri’s U.S. ice cream business for around $4 billion.
Nestlé is not the only big name in consumer goods rethinking its ice cream business: Unilever carved out its ice cream division into a separate company Magnum, to focus on other areas.
As part of a restructuring the company also plans to cut about 16,000 jobs worldwide through automation and the use of artificial intelligence.
Navratil’s productivity push has faced challenges in the infant formula market.
Nestlé, which markets Guigoz in France and SMA in the United Kingdom, said that supply shortages and recalls of some infant formulas could have slightly affected sales volumes this year.
Last month the company recalled some batches of formulas from dozens of countries, including France and the United Kingdom, after traces of cereulide were found in product samples. Consuming cereulide can cause vomiting and diarrhea.
French Danone also recalled some formulas, including Aptamil and Cow & Gate, in the United Kingdom.
In a statement on its website this week, the French Ministry of Health said it is investigating cases of the deaths of three infants who consumed a formula linked to the recalls.
“To date, the causal link has not been scientifically established.”
– French Ministry of Health
Navratil stressed that Nestlé has not yet contacted French authorities. He added that quality-control mechanisms detected cereulide in an oil-based mix used in formulas, but previously not considered to contain a toxin.
The recalls also prompted the EU to introduce stricter standards for cereulide levels in infant products.