HUL may scoop out its not-so-vanilla business

The ice-cream business requires a distinct approach to manufacturing and distribution.

For India's biggest consumer goods company, the ice-cream category accounts for ₹2,000 crore, or roughly 3% of its total sales, with brands such as and Kwality Wall's in its cart. Unlike the home and personal care categories where HUL is a dominant leader, the company trails in the Indian ice-cream market.

HUL also competes with a number of local and global brands in the segment such as Mother Dairy, , CreamBell, Naturals, Havmor and Baskin Robbins.

"Since ice-cream is scalable both at the mass and premium segments, it's an attractive business in India," said one of the executives cited above. "If HUL gets a multiple premium, it will look at a potential sell-off. Else, the internal thought is to scale up the business rapidly as a separate entity for 12-15 months before it decides on the next move."

Unilever is the world's biggest ice-cream maker with brands such as Ben & Jerry and Magnum. The Euro 7.9 billion business accounts for 16% of its global revenue. It's also a market leader in several countries.

Industry executives said it's unlikely an existing player in India will buy HUL's ice-cream business and any sale could be to a multinational or to private equity firms. Also, the strategy will be entirely determined by what Unilever chooses to do with its ice-cream business, they said.

Following Unilever's decision, the India unit said it's considering the way forward.

"As far as the Indian ice-cream business is concerned, we are evaluating the various options in light of this announcement," an HUL spokesperson said. "We will discuss this with the HUL board and Unilever management in the coming months. Once the approach is finalised, we will communicate further."

The ice-cream business differs from that of other products, involving a cold-chain, go-to-market operating model, seasonality, and an innovation rhythm of its own.

HUL has built the business through acquisitions - Kwality in 1994 and Adityaa Milk in 2018.

In India, HUL merged Kwality's branding with that of its global label Wall's that was first launched in 1922 and sold in more than 50 countries under many different local names. The brand is sold as Algida in Italy and Turkey, Langnese in Germany, Kibon in Brazil, Streets in Australia and Ola in the Netherlands. As a result, all these trademarks including Kwality Wall's are owned by Unilever.

"If there is an offer to buy out HUL's ice-cream business, then we will certainly look at it. The category is attractive in India and has a significant upside. But the valuations have to be reasonable," said a senior executive at a large packaged foods company.

Last October, Unilever announced it would focus on 30 key brands that account for 70% of sales and look to improve gross margins.

A report by retail consulting firm Wazir Advisors estimates the Indian ice-cream market will cross $5 billion in sales by FY25, up from $3.4 billion now.