HUL’s Ice-Cream Business Attracts Industry Giants: Nestle, RJ Corp, and MMG Eye Acquisition

HUL Initiates Strategic Review for Its Ice-Cream Business:
Hindustan Unilever (HUL) has formed a committee of independent directors to evaluate the future of its ice-cream business. This move signals the possibility of HUL exiting the ice-cream segment, sparking speculation in the market about a potential sale. The decision comes as HUL looks for ways to restructure and optimize its portfolio, focusing on areas that drive growth and profitability. The committee will explore various alternatives, which could include a sale, a joint venture, or a potential spin-off of the ice-cream division.

Key Players Eyeing Acquisition Opportunities:
Prominent companies like RJ Corp, MMG Group, and Nestle SA are closely watching developments. RJ Corp, which manages popular fast-food chains like KFC and Pizza Hut and is PepsiCo’s largest bottler in India, already has a presence in the ice-cream market through its Cream Bell brand. MMG Group, which operates McDonald’s outlets in North and East India and has significant cold-chain infrastructure, could leverage its existing systems to expand into HUL’s ice-cream business. Nestle SA, the world’s largest packaged food company, also sees potential synergies, having previously explored the Indian ice-cream market with its premium brand, Movenpick.

HUL’s Ice-Cream Business and Major Brands:
The ice-cream division of HUL includes well-known brands such as Kwality Wall’s, Cornetto, and Magnum, which collectively contribute approximately 3% to the company’s total annual sales of Rs 60,000 crore. While a small percentage of the overall revenue, the ice-cream business has strong brand recognition and a significant presence in India. Kwality Wall’s is one of the leading players in the Indian ice-cream market, which further adds to its attractiveness for potential buyers.

RJ Corp’s Expanding Presence in the Ice-Cream Industry:
RJ Corp, already a significant player in the Indian food and beverage market, operates the Cream Bell ice-cream brand, which ranks among the top five in India. Cream Bell has a wide distribution network, spanning 25 states, with 800 distributors and 11,000 pushcarts, but its market share in the ice-cream sector is smaller compared to its other ventures. Acquiring HUL’s ice-cream business would allow RJ Corp to rapidly expand its footprint in this segment and enhance its product portfolio by leveraging HUL’s well-established brands and distribution networks.

Nestle’s Strategic Fit and Previous Forays into Ice-Cream:
For Nestle SA, which has a robust dairy and cold-chain infrastructure in India, acquiring HUL’s ice-cream business would complement its existing product lineup. Nestle’s previous attempt to enter the Indian ice-cream market with its premium brand Movenpick failed due to pricing challenges, but the acquisition of a mass-market player like Kwality Wall’s could provide the scale and consumer reach necessary to succeed. Nestle has expressed interest in expanding through acquisitions that align with its growth strategy, making this an attractive opportunity if the valuation meets its expectations.

MMG Group’s Cold Chain Expertise and Market Synergies:
MMG Group, which operates McDonald’s in North and East India, already has an advanced cold-chain infrastructure essential for managing frozen products. This makes the group a strong contender for acquiring HUL’s ice-cream business. By integrating HUL’s ice-cream brands into its existing operations, MMG could benefit from synergies, particularly in distribution and logistics, offering opportunities to scale its operations in the frozen dessert space. This move would also allow MMG to diversify its product offerings beyond fast food and further solidify its market presence in the consumer food space.

Growth Prospects of the Indian Ice-Cream Market:
The Indian ice-cream market is on a fast growth trajectory, with industry reports projecting its value to exceed $5 billion by FY25, up from $3.4 billion in FY23. This rapid growth is driven by increasing consumer demand, rising disposable incomes, and expanding availability of cold-chain infrastructure across the country. With the market expected to grow at a compound annual growth rate (CAGR) of over 10%, any acquisition of HUL’s ice-cream business would provide immediate access to this expanding market, enhancing the strategic value of the deal.

Unilever’s Global Ice-Cream Dominance:
HUL’s parent company, Unilever, is the world’s largest ice-cream manufacturer, with global brands such as Ben & Jerry’s, Breyers, and Magnum forming a crucial part of its business. Globally, Unilever’s ice-cream division accounts for Rs 7.9 billion, or 16% of the company’s total revenue. This highlights the significance of the ice-cream segment for Unilever, though in India, the business contributes a relatively smaller share. This global dominance adds weight to HUL’s decision-making process as it looks to optimize its business units in line with long-term goals.