The world’s biggest food and drinks maker said Thursday that it was in “advanced negotiations” to sell its remaining ice cream business to its joint venture partner, Froneri.
London (CNN) — Nestlé has thawed on ice cream.
The world’s biggest food and drinks maker said Thursday that it was in “advanced negotiations” to sell its remaining ice cream business to its joint venture partner, Froneri.
The division, which includes brands such as Häagen-Dazs and Drumstick, is valued at just shy of 1 billion Swiss francs ($1.3 billion). Nestlé plans to sell the brands to UK-based Froneri over the next year, but remain in the joint venture.
Nestlé’s share price gained 3% in morning trade in Zurich, before giving up some of those gains.
The move comes as the maker of Nespresso and KitKat bars looks to boost sales and simplify its sprawling operations under new CEO Philipp Navratil. Navratil took over from Laurent Freixe in September, after Freixe was abruptly dismissed for failing to disclose a romantic relationship with a more junior colleague.
In full-year earnings, Nestlé said it would focus on its coffee, pet care, nutrition and food and snacks businesses.
“We are focusing our portfolio on four businesses, led by our strongest brands,” Navratil said in a statement.
On a call with reporters, he said that Nestlé’s six ice cream brands were a “distraction” from the rest of its portfolio, which spans cereal, coffee, confectionary and frozen foods, to name a few.
“We held on to those six businesses because we thought we could drive growth (but) they don’t have any global scale,” he added. “We cannot drive (growth) the same way that Froneri can.”
Froneri was created a decade ago by Nestlé and UK ice cream maker R&R. In 2019, Nestlé sold its US ice cream unit to Froneri for $4 billion.
Nestlé is not the first major consumer goods company to ditch ice cream, which brings with it bothersome idiosyncrasies such as season-dependent demand and the need for a supply chain that can support frozen goods. Unilever spun off its ice cream unit in December, creating the largest ice cream business in the world — The Magnum Ice Cream Company — because it wanted to focus on fewer products.
In the spirit of scaling back, Nestle is already in the process of cutting around 16,000 jobs worldwide, as it works to slash costs, including through automation and the use of artificial intelligence.
Fallout from infant formula recall
Navratil’s efforts to boost performance at the struggling Swiss multinational have been hampered by a major infant formula recall.
Nestlé, which makes Guigoz in France and SMA in the UK, said Thursday that stock shortages and returns of some formula products would have a marginally negative impact on its sales volumes this year.
Last month, the company recalled some batches of infant formula from dozens of countries, including France and the United Kingdom, after it found traces of the toxin cereulide in product samples in December. Consumption of cereulide can cause vomiting and diarrhea.
French firm Danone has also recalled formula products, including some Aptamil and Cow & Gate batches in the UK.
In an update posted to its website this week, France’s health ministry said it was investigating the deaths of three infants who consumed formula affected by the recalls. “To date, no causal link has been scientifically established,” it noted.
Navratil said that Nestlé had not yet been contacted by French health authorities. He added that Nestlé’s quality control processes had led them to detect cereulide in an oil blend commonly used in formula but not previously considered as containing the harmful toxin.
The recall prompted the European Union to set stricter limits on cereulide levels considered safe for consumption in baby products.
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