Nestle in talks to sell ice cream arm as formula recall squeezes profits

Dan Coatsworth, head of markets at AJ Bell, said: “Nestle is to follow in Unilever’s footsteps and do the Strawberry Splits on its ice cream interests.

“Nestle has a much smaller footprint in the ice cream world than Unilever had, with only a handful of brands including Maxibon and Extreme.

“It sells Haagen-Dazs under licence from Froneri and is now in talks to offload all its ice cream interests to that company.

“Such a deal makes perfect sense. Big consumer brand companies like Nestle are going through a process of slimming to greatness.

“They’re looking at which parts of their business have the best potential for growth and anything that doesn’t cut the mustard is on the chopping block.

“The rapid growth in weight-loss drugs also creates uncertainty for high-calorie products like ice cream and that trend might have encouraged Nestle to think about which business areas are now rated higher-risk from a GLP-1 perspective.

“What makes the Froneri deal slightly confusing is that Nestle would essentially be selling the ice cream interests back to itself, albeit in diluted form.

“Froneri is a 50:50 joint venture between Nestle and PAI Partners and is a roll-up vehicle for the ice cream sector.

“Should a deal be struck to sell the remaining ice cream interests to Froneri, it would be logical to consider Nestle’s next steps.

“Is it simply parking the rest of its ice cream operations in a joint venture so it can keep a foot in the door but not be directly responsible for the day-to-day operations?

“Or is it now time to exit its stake in Froneri and cut ties completely with ice cream?

“Last October, PAI struck a deal whereby Abu Dhabi Investment Authority became a significant minority co-investor in Froneri.

“That might have been part of a bigger plan to change the ownership structure and potentially create an exit path for Nestle by bringing in a big investor who could mop up some or all of its holdings.”