Nestle Wants Out of the Ice Cream Business - Here’s Why

One of the largest food companies in the world is set to move on from a popular dessert treat despite connections to major brands and flavors across the world.

Nestle announced that it intends to sell its remaining in-house ice cream brands to Froneri, the company that already owns Haagen-Dazs, Drumstick, Oreo, Cadbury and other major ice cream brands around the globe.

"There are times when we decide that focusing means exiting businesses," said Nestle's CEO Philipp Navratil. He added that the ice cream business is "strong, but small, and it's a distraction for us".

Nestle's Shift in Strategy Under New CEO

The brands Nestle intends to sell account for over $1 billion in sales in countries around the world, including Canada, Chile, Peru, Malaysia, China and Thailand. KitKat ice cream and Coffee Crisp are among the brands that Nestle will move on from, and the sale will essentially serve as an extension of its prior partnership with Froneri.

Froneri acquired Nestle's European and United States-based ice cream brands back in 2016, and Nestle says it intends to expand that partnership. The union of the two corporations has proven lucrative, with Goldman Sachs and Abu Dhabi-based investors backing Froneri at a valuation of over $18 billion.

With ice cream no longer a priority, Nestle intends to focus its efforts in areas like coffee, petcare, nutrition, food and snacks. The company reported better-than-expected sales growth in the fourth quarter, shortly after Navratil took over as CEO in September.

Navratil made plans to cut thousands of jobs within the company after arriving, and has strategies to focus on the corporation's most lucrative and revenue-generating brands and assets. An internal review of underperforming brands in the vitamin and supplement space has prompted Nestle to also consider potential buyers there.

Nestle's Response to Food Safety Issue

Nestle is still reeling from a recent recall on infant formula that has affected many of its top performing brands. The recall was due to cereulide contamination traced to arachidonic acid (ARA) oil supplied to multiple companies. Cereulide contamination can be particularly harmful and potentially even fatal to babies and small children.

Gerber was not named in the recall itself, but Navratil noted that trepidation among consumers around Nestle-based baby formula may have hurt the brand's reputation. Nestle recalled products in over 60 countries and worked to inform customers about the elimination of potential risk.

"Production at all our infant formula factories is running at full capacity to ensure our products reach consumers as quickly as possible. We are focused on increasing the availability of infant formula to meet demand, providing parents and families with high quality products they can trust," Nestle said in a statement, reacting to the recall.

"All batches of the oil ingredient from our other suppliers are now systematically tested to confirm our infant formula are free from cereulide."

With the recall now in the past, Nestle will focus on serving customers in its most profitable and lucrative markets.