From the infant formula recall to the potential sale of Waters, Nestlé’s full-year results promised several headline-making stories – yet, it was the group’s small ice cream business that made the biggest news.
The Swiss CPG major announced that ice cream had become a ‘distraction’ for the company, which is executing a cost savings programme and sharpening its portfolio into four distinct pillars: coffee, petcare, nutrition, and food and snacks.
Nestlé CEO Philipp Navratil told investors its remaining ice cream business is “strong but small, and it’s a distraction for us”.
“This business is a great fit for Froneri and we have agreed to sell [it] in a phased way,” he explained.
Ice cream generates shy of CHF 1 billion for Nestlé and most of it is concentrated in the Americas (Canada, Chile, Peru), plus China, Malaysia and Thailand, with some marginal activity in Europe.
The businesses will be integrated into Froneri, Nestlé’s pure-play ice cream joint-venture with PAI Partners, during 2026 and early 2027.
There are no plans for Nestlé to exit Froneri in which it holds a 50% stake.
“We are really happy with the performance that Froneri is driving,” Navratil said. “[It is] our strong belief that Froneri is the right owner for those businesses, and will drive a better performance than we would do going forward.”
Why Froneri remains important to Nestlé
Nestlé set up Froneri as a 50:50 joint venture with private equity firm PAI Partners in 2016.
To form the company, Nestlé and PAI-owned R&R Ice Cream contributed their ice cream businesses across parts of Europe, the Americas, Southeast Asia and South Africa.
In 2020, Nestlé offloaded its US ice cream division, complete with key brands Haagen-Dazs and Dreyer’s. Since 2024, Froneri expanded into Uruguay through acquiring local player Crufi and also bought Food Union’s ice cream business in Europe.
More broadly, Froneri has established itself as one of the two biggest ice cream companies globally, rivalling only Unilever’s ice cream business (Magnum, Ben & Jerry’s, Cornetto, Wal’s) in scale and brand might.
The JV’s FY24 profit rose eightfold from a loss the prior year; revenue grew 5.5%, and volumes increased 3%.
Froneri is strategically important to Nestlé for two reasons. It has paid a dividend of around CHF 2bn to the Swiss major in the last two fiscal years, helping it reduce its net debt; while simultaneously giving its well-known brands a more efficient growth platform.
Unilever echoes
Philipp Navratil repeatedly called ice cream ‘a distraction’ for Nestlé, which he wants to pivot into a leaner business built around high-growth categories such as coffee and petcare.
Navratil’s tone echoed that of Unilever chief executive Fernando Fernandez, who called ice cream ‘an outlier’ in the portfolio and told investors last year that Unilever needed ‘to leave that [business] behind’.
What Unilever did next was spin off ice cream into The Magnum Ice Cream Company (TMICC), a pure-play firm in which the CPG major still holds a 20% stake.
The parallels are clear – but why is it that major food and beverage companies are shunning a high-growth category like ice cream?
Why ice cream is high-growth but tricky business
According to Nestlé’s chief executive, the ice cream category shows mid-single digit growth consistently and isn’t being impacted by trends such as GLP-1 drugs that have shaken up the wider snacking and confectionery space.
This is likely thanks to innovation in formats, such as mini bites and sticks, and the understanding that consumers – even those looking to lose weight – want to treat themselves occasionally, particularly with premium, portion-sized products.
On an operational level, however, ice cream is tricky business – there’s high seasonality, distinct supply chains, and capital intensity including high branding and marketing costs. It therefore makes sense that such businesses are managed within a focused company rather than as part of a diverse portfolio.
This strategy of separating ice cream isn’t unique to Nestlé and Unilever. Belgian dairy co-op Milcobel sold YSCO, one of the continent’s largest private-label ice cream manufacturers, to investment firms Davidson Kempner Capital Management LP and Afendis, in a bid to focus on its cheese and milk powder business. (The co-op is now being integrated into FrieslandCampina, itself a sign of Europe’s increasingly consolidated dairy market.)
In sum, ice cream requires a nimbler approach to succeed: and in Froneri, Nestlé already has a strong base to influence the category from without diluting its resources and, ultimately, its balance sheet.
