Benefits for spinning off companies include:
- Short cuts in the decision-making process thanks to a bypass of corporate HQ, meaning easier approval of budgets and spending.
- Better efficiencies and innovation: spin offs can adapt quicker alone than tied to their parent.
- Simplification: the business can be better understood by investors and thus attract new ones that have been put off by lack of focus on one market and with an interest in a particular sector.
- New and better, or more incentivised leadership: spun off companies will have a separate leadership from the parent company with unique goals, and thus leaders will be more focused and driven on specific targets.
Spun off companies will need to redefine themselves through brand and marketing activity to communicate to consumers and investors, and even internally to employees, their new agenda. These businesses will be looking to retain and gain market share and investment. There is added pressure for spun off divisions to succeed, which means they are likely to invest heavily in all the tools to get it right.
Here are some companies listed in ALF that have completed spin-offs or are planning to spin off divisions, hence should be on your radar for upcoming changes. ALF will keep you up to date with their decision-making units and the opportunities that arise.
Daimler plans to split up the world’s largest manufacturers of luxury cars and commercial vehicles, renaming itself Mercedes-Benz and separately listing its truck unit by year-end. Mercedes-Benz will then focus on passenger vehicles and vans, as well as on software development.
The move aims to help strengthen the Mercedes-Benz brand and further distinguish between the car and commercial vehicles operations as the industry faces major technological and structural changes in the areas of electrification and self-driving capability.
Mercedes-Benz plans to invest more than €40 billion by 2030 to be ready to take on Tesla, Porsche and BMW in an all-electric car market and said that, as of 2025, it expects electric and hybrid electric cars will make up 50% of sales. Daimler is also acquiring British firm YASA Limited to help develop high-performance electric motors. Daimler’s CEO Ola Källenius said: "We really want to go for it ... and be dominantly, if not all electric, by the end of the decade."
The parent company will also unveil a new business group comprising the AMG, Maybach and G-Class sub-brands, in September. The move will streamline marketing costs and is part of Daimler’s CEO Ola Kallenius' plan to boost productivity and profitability, with a focus on high-margin sales. AMG boss Philipp Schiemer is expected to lead the group.
A spokesperson from Daimler said: "Strengthening the sub-brands is an important pillar in the Mercedes-Benz strategy. We will not only maintain the independence, strong identities and evolved corporate cultures of the individual brands, but also further expand and sharpen them."
Further reorganisation efforts are underway at the German car maker. In May, Mercedes announced it was merging its global marketing and communications activities into one unit under the leadership of Bettina Fetzer, the car maker's marketing boss. The aim of the realignment is to have a uniform global presence for the Mercedes corporate brand and its product brands.
On average, the company spent £24.5m a year across all media channels between 2016 and 2020. It was only last year that it spent £20m, the lowest amount since 2015. Now that the car maker is going through a new operational structure and has big plans to lead the EV sector, Mercedez-Benz will be increasing its advertising spend and even start looking for a new agency to create a consistent brand image across all markets.
The multinational has unveiled plans to spin off its consumer arm which includes well-known brands such as Centrum vitamins and Sensodyne toothpaste, into a separate business. This decision followed investor pressure as the business lagged behind other pharma giants. Due to take place next year, the spin-off will see GSK focus on growing its remaining business.
The spun off group will be listed on the London Stock Exchange with GSK retaining a 13.6% stake that will be sold off over time. GSK’s consumer business was bulked up when it merged with Pfizer’s consumer unit back in 2018. The business includes oral health (£2.8bn of sales in 2020), pain relief (£2.2bn), vitamins, minerals and supplements (£1.5bn), respiratory health (£1.2bn) and digestive health (£1.8bn).
Health and hygiene brands have become popular across the pandemic, so the likes of Centrum vitamins from GlaxoSmithKline will likely be a focus point for the new entity.
The global food & drinks producer has plans to spin off most of its loose-leaf tea business. This would cover Tazo, Pukka Herbs, T2 and other brands, as well as Lipton Iced Tea.
CEO Alan Jope said: “The balance of Unilever's tea brands and geographies and all of our tea estates have a very exciting future, but this potential can be best achieved we believe as a separate entity, and a process will now begin to achieve this separation, which is expected to conclude by the end of 2021”.
Unilever’s growth has been outpaced by rival Nestle in recent years. The multinational has created a huge empire, especially since Jope took the helm in 2019, going on an acquisition spree to enter trendy sectors including vitamins, luxury laundry and plant-based food. It is now looking to simplify its business to create better value and spinning off the tea business could mark the first step in separating its food and drink offering from its beauty and household products.
The company will reportedly spin off its dairy processing business and refocus on its B2B taste and nutrition arm. Although this has not yet been finalised the company’s move towards taste and nutrition was confirmed when it recently offloaded Richmond Sausages, Denny and Fridge Raiders to Pilgrim’s Pride as part of a £707m deal for its consumer foods, meats and meals division, which generated £6.bn of revenue for Kerry in 2020. This deal is expected to close in the fourth quarter and to generate cash for investment as part of Kerry’s business strategic realignment and simplification. The company has since acquired preservative maker Niacet Corp for £732m and has said it will actively target more acquisitions.
Chief executive Edmond Scanlon said: “This transaction further enhances Kerry’s focus as a leading business to business ingredient solutions provider for the food, beverage and pharmaceutical markets.”
The rest of its consumer foods division, including its dairy activities, was initially going to be spun out into a joint venture with Kerry Creameries Co-op. However, the offer was deemed too low and the transaction was called off in April.
Pilgrim’s Pride will benefit from the newly acquired Richmond which saw sales boosted by 31% to £149m in 2020. The business previously acquired Tulip and Moy Park which it has since rebranded to Pilgrim’s. For now, meat and meals Chief Executive Nick Robinson will remain in place to lead the activity of the acquired brands under the new owner.
CEO Fabio Sandri said: “The inclusion of the Kerry Consumer Foods’ Meats and Meals business follows our strategy of a well-balanced portfolio of products, geographies and customer base. We believe that the acquisition will also enable the company to develop new and innovative products through the businesses’ combined expertise to support our key customers’ growth objectives”.
The new media company would be the result of a $43 billion proposed merger between Discovery and WarnerMedia which AT&T said it would spin out just three years after buying it (Time Warner at the time).
The new ‘pure play’ content company will own one of the deepest libraries in the world with nearly 200,000 hours of programming. It will also house both HBO Max and discovery+, two major streaming services which have launched over the past 12 months.
The WarnerMedia/Discovery company will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices. AT&T’s CEO John Stankey said that the deal "will support the fantastic growth and international launch of HBO Max with Discovery's global footprint and create efficiencies that can be re-invested in producing “greater content to give consumers what they want."
The new venture is led by Discovery’s CEO David Zaslav who said: “Warner Bros. Discovery will aspire to be the most innovative, exciting and fun place to tell stories in the world – that is what the company will be about. We love the new company’s name because it represents the combination of Warner Bros.’ fabled hundred-year legacy of creative, authentic storytelling and taking bold risks to bring the most amazing stories to life, with Discovery’s global brand that has always stood brightly for integrity, innovation and inspiration”.
Warner Bros is growing its marketing team by adding two new marketers and will be building a new marketing team specialising in digital, programmatic and social. The company is the next big player in the streaming world with the tagline ‘the stuff that dreams are made of’ in a nod to the 1941 Warner Bros’ film ‘The Maltese Falcon’.
By Natalie Fedden
Senior Content Executive, ALF
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