Nestle has announced it is in advanced negotiations to sell its remaining ice cream business, as the Swiss consumer giant faces a significant squeeze on profits due to the impact of widespread baby formula recalls. The company reported that underlying trading operating profit fell by 8.4% to 14.4 billion Swiss francs (£13.8 billion) in 2025, with a 75 million Swiss franc (£71.9 million) hit specifically attributed to the formula recall's effect on sales returns.
Ice Cream Business Sale and Strategic Shifts
Nestle confirmed that talks are underway regarding the sale of its ice cream division to Froneri, an ice cream joint venture with private equity firm PAI Partners. This venture owns well-known brands such as Haagen-Dazs. The move is part of a broader strategic overhaul led by recently-appointed CEO Philipp Navratil, aimed at driving a turnaround amid mounting pressure from shareholders.
In addition to the ice cream business, Nestle has initiated the process for a potential sale of its waters and drinks business, which includes popular brands like San Pellegrino and Perrier. This division, reportedly valued at £4.4 billion, is expected to be deconsolidated from the company's accounts starting in 2027.
Impact of Baby Formula Recalls
The profit decline was exacerbated by an increase in costs linked to restructuring and other trading items, including impairments, litigation, and allowances for inventory write-offs. Specifically, the baby formula recall led to an inventory write-off worth 110 million Swiss francs (£105.5 million). Nestle stated that the recall has now been completed, and the company is focused on replenishing stocks, having restarted production at its formula factories.
In the UK, Nestle and rival Danone have announced multiple recalls since the beginning of the year. In January, Nestle initiated a precautionary recall of several batches of 12 SMA Infant Formula and Follow-On Formula products due to the possible presence of cereulide, a toxin produced by bacteria.
Financial Performance and Outlook
Despite the challenges, Nestle reported some positive metrics. Organic sales grew by 3.5% in 2025, partly driven by a 2.8% increase in pricing. However, reported sales slipped by 2% overall, as higher sales were offset by unfavorable currency exchange rates.
CEO Philipp Navratil commented on the company's performance, stating, "I am encouraged by our performance during 2025, which reflects the targeted actions we have taken in a difficult external environment. We are accelerating our strategy. We are focusing our portfolio on four businesses, led by our strongest brands, with prioritised resources and a simplified organisation."
The strategic moves, including the potential sales of the ice cream and waters businesses, underscore Nestle's efforts to streamline operations and refocus on core areas amidst ongoing financial pressures from the formula recall and market dynamics.
