In today’s Finshots, we tell you why Hindustan Unilever (HUL) is demerging its ice-cream business.

The Story

HUL says it’s simple. It wants to demerge its ice-cream business into a newly listed entity – Kwality Wall's India Ltd (KWIL). When that happens in a year or so, shareholders will get one KWIL share for every HUL share, and Unilever’s global ice-cream arm — Magnum HoldCo — will acquire roughly 61.9% of the company.

This isn’t new. We wrote to you briefly about the hive off and the why behind this move…

HUL is the Indian arm of Britain’s Unilever PLC. And its second biggest market after the US in terms of revenue. Recently, Unilever decided to spin off its global ice cream business which includes big brands like Wall’s, Magnum and Ben & Jerry’s.

That’s because ice cream manufacturing requires a different approach in terms of manufacturing and distribution. And this strategy could actually help Unilever simplify the products in its portfolio by focusing on its four big business units ― Beauty & Wellbeing, Personal Care, Home Care and Nutrition. That'll also help it save a whopping €800 million ($870 million) over the next 3 years. Besides, raking in more capital if it becomes a newly listed company.

For HUL, the logic is similar. Ice-cream is an oddball in its otherwise asset-light pantry. It needs cold-chain infrastructure, high upfront capital, and bursts of marketing spend in summer. By syncing with the global carve-out, it gets a cleaner structure. KWIL can license Unilever’s brands and know-how, while HUL gets sharper focus on its core businesses.

So what lands inside KWIL, you ask?

Well, some serious muscle. It’ll start debt-free with net assets of ₹900+ crore, 5 manufacturing facilities, 19 warehouses, a workforce of 1,200 employees and 2.5 lakh freezer cabinets in trade.

But muscle is just part of the story. The real excitement is in the market it’s stepping into.

To put things into perspective, a decade ago, the average Indian ate just 400 ml of ice cream a year. Today, it’s 1.6 litres. That’s a fourfold jump sure, but still tiny next to America’s 20.8, or even China’s 4.3 litres. The category is worth around ₹30,000 crores and is projected to exceed ₹90,000 crores in the next eight years.

And within that growing pie, the market share mix tells its own story. While Amul leads with over a 40% share, Kwality Wall’s sits in the early-teens, and regional brands like Vadilal, Arun and Havmor defend their home turfs fiercely. But there’s still opportunity as the unorganised market makes up 37%, ripe for a formal player to chip away at.

Sure, as of FY25 the ice-cream business contributed ₹1,800 crores or about 3% to HUL’s overall sales and 1% of profits. But it also earns a low single-digit profit margin compared to its parent.

But HUL’s management calls ice cream a “high-growth” category that needs “substantial capital” to unlock its full potential. And the industry numbers we just went through suggest they’re not exaggerating. KWIL can use its 2.5 lakh freezer footprint as a launchpad to push deeper into its existing nation-wide presence, especially in rural areas, where rising disposable incomes are creating demand for affordable indulgence. Moving into milk-based ice creams can help it nibble the “pure dairy” territory, while expanding its premium ranges like Magnum or Cornetto could tap the aspirational urban segment. There’s also the quick commerce home-delivery ice-cream boom, allowing KWIL to bypass traditional seasonality and push high-margin SKUs (Stock Keeping Units or different units of inventory) all year round.

But as we mentioned before, ice cream isn’t a straight line to growth. And there are a few challenges KWIL will have to navigate too.

First, margins. There’s no separate line in the financials that mentions how much KWIL profits. But HUL’s consolidated segment makes about 24% operating profit margins. And ‘frozen desserts’, where KWIL has a larger share, typically fetch less than dairy ice creams. So given that KWIL will start debt-free, its gross margins will still lag HUL’s as well as the industry average. At least for a while.

Second, seasonality. Ice-cream demand peaks in summers but drops sharply in monsoon and winter, leaving plants and trucks under-utilised. That means working capital spikes pre-summer, and cash flows turn lumpy. Tie that with capital investments which will be front-loaded in the early years to add freezers, expand co-manufacturing, develop new SKUs and this looks like a tight rope. Expansion in itself is a cold-chain headache.

Third, input volatility. Prices of vegetable oil, a key frozen dessert ingredient, can swing wildly in a quarter. Milk and sugar prices aren’t exactly steady either. Passing those costs on to consumers is tricky in a price-sensitive market where many regional as well as big brands like Amul lean on their co-operative cost base.

Meanwhile, regional incumbents like Vadilal in the west, Arun in the south and Havmor in Gujarat have decades of brand loyalty and deeply entrenched distribution.

So yeah, there are challenges for sure. But all of this explains the carve-out. In HUL’s Profit & Loss Statement, these traits look like noise. For KWIL, they’re simply the business model. Freed from competing for capital with soaps and shampoos, KWIL can double down on freezer expansion and also push milk-based SKUs like its newly launched Slow Churn ice cream to capture the pure dairy segment.

For investors, the carve-out’s financials will reveal more, but some contours are clear. The bet is on whether KWIL can turn the above levers fast enough, especially since the management has cautioned that the demerger’s benefits will take time to show. The plan is to build a national footprint while the business is still in its investment phase, with meaningful gains expected only a few years down the line. 

They’re also eyeing improved profit margins within 2–3 years, by positioning ice-cream also as a post-meal and snacking category. And once the current royalty arrangement with Magnum expires, KWIL will ink fresh trademark and brand licensing contracts directly as a listed entity to bring in more synergies.

But the proof will be in execution, in keeping cabinets productive, margins steady and consumers coming back, rain or shine. If it pulls that off, this won’t just be HUL moving a freezer out of its kitchen. It’ll show how to ring-fence volatility without freezing growth.

Until then…

Don’t forget to share this with your friends, family or even strangers on WhatsApp, LinkedIn and X.

🚨 ATTENTION: FINSHOTS FAMILY

This Independence Day weekend, gift yourself freedom from financial stress. In just two days and two masterclasses, discover how the right insurance can protect your family’s future without overspending. Zero confusion, only clarity.

Registering will give you access to both Masterclasses:

1️⃣ Life Insurance Masterclass
📅 Date: Saturday, 16th August ⏰ Time: 11:00 AM - 12:30 PM

You'll learn:
✔️ How to secure your family's financial future without overspending
✔️ Why mixing insurance and investments can be costly
✔️ Term, ULIP, or Endowment — which plan suits you best?
✔️ How starting life insurance early helps you save significantly

2️⃣ Health Insurance Masterclass
📅 Date: Sunday, 17th August ⏰ Time: 11:00 AM - 12:30 PM

You'll discover:
✔️ How to choose health insurance that fully protects your family
✔️ Essential tips for managing medical expenses efficiently
✔️ Mistakes to avoid when selecting health insurance
✔️ Strategies to get the most value from your health insurance plan

Live Q&A — Get Your Questions Answered by an Expert in both webinars.

LIMITED SLOTS AVAILABLE! Click here to reserve your spot now — only 300 seats for the series!