Nestlé Malaysia explores ice cream divestment to sharpen core focus

KUCHING (Feb 20): Nestlé (Malaysia) Bhd’s potential divestment of its ice cream business to UK-based Froneri International Ltd would allow the group to focus on higher-margin core segments including beverages, dairy, prepared foods and nutrition, according to MBSB Research.

In a filing with Bursa Malaysia, the company said the process will involve thorough due diligence, comprehensive engagement with relevant local stakeholders and strict adherence to all applicable legal, regulatory, and governance requirements.

Froneri is a joint venture (JV) established 10 years ago between Swiss food giant Nestle and private equity investor PAI Partners. Under this JV, all Nestle European ice cream businesses and several selected ice cream operations in other regions were included.

Nestle Malaysia said the company’s ice cream segment was not part of this original scope.

Analysts with the research arm of MBSB Investment Bank Bhd said the potential divestment reflect Nestlé’s global intent to exit the more capital-intensive ice cream segment while retaining indirect exposure through its 50 per stake in Froneri.

Its ice cream segment, while supported by strong brand recognition, is typically subject to seasonal demand and heavier working capital requirements.

As such, the house said streamlining the portfolio could therefore improve operational focus and capital allocation efficiency over time.

“The Malaysian business continues to benefit from strong brand equity, entrenched distribution networks and stable domestic demand.

“Should the divestment proceed, the sharper category focus could support earnings quality and margin sustainability over the medium term, although execution details and transaction terms will ultimately determine the financial impact,” it said in a note on Friday.

The development follows an announcement by Nestlé S.A. that it has entered advanced negotiations to sell the remainder of its global ice cream businesses spanning Asia, Canada and parts of Latin America to Froneri, its existing 50:50 joint venture with PAI Partners.

The transaction forms part of chief executive officer Philipp Navratil’s strategy to streamline operations and concentrate on four core pillars: Coffee, Petcare, Nutrition, and Food & Snacking.

The group is targeting 3 to 4 per cent organic sales growth in 2026 alongside improved operating margins, supported by portfolio optimisation and cost discipline.

Following the global announcement, Nestlé (Malaysia) has initiated a formal process to explore the potential sale of its local ice cream unit to Froneri.

The Malaysian portfolio includes brands such as La Cremeria, Musang King sticks and Mat Kool, which were not part of the original Froneri joint venture established a decade ago.

The board said the process remains at an early stage and will involve due diligence, stakeholder engagement and regulatory compliance. Further updates will be announced if there are material developments.

No financial details have been disclosed at this point. MBSB Research noted that while a disposal could reduce revenue contribution, it may also strengthen margins, depending on the segment’s relative profitability.