Ben & Jerry’s fudge has come back to bite Unilever

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Ben & Jerry’s, the Vermont-based ice-cream brand owned by Unilever, is known for its quirky concoctions of natural ingredients. From Cherry Garcia, the flavour named after a co-founder of the Grateful Dead, to Phish Food, its mix of chocolate ice-cream, marshmallow and caramel swirls, they are sweet and amusing.

None is as strange and distinctive as the agreement it struck with Unilever to retain its independence when it was acquired by the British company 25 years ago. The deal laid out the way Unilever and Ben & Jerry’s would divide managerial responsibility, some details set out precisely and others covered with a thick layer of fudge.

Reading it now, with its references to Ben & Jerry’s “Social Mission” and devotion to buying brownies from the Greyston Bakery in Yonkers, New York, and milk and cream from the St Albans farm co-operative in Vermont, it is obvious that it could only work with a lot of goodwill on both sides. That has come under growing strain in recent years and has now evaporated.

Ben & Jerry’s last week sued Unilever for allegedly firing its chief executive David Stever, claiming that the UK company had tried to stop it speaking out on political issues, notably Israel’s war with Hamas in Gaza. This is the latest in a series of legal skirmishes between them, led by Ben & Jerry’s directors.

It is easy to see why those directors take their independence seriously, given Unilever not only conceded a huge amount to secure Ben & Jerry’s approval a quarter of a century ago, but codified it in a legal agreement without a sunset clause. But it is also surreal that a company that owns a brand cannot launch a new product or appoint a chief executive without consulting a body that no longer includes the founders.

Tensions have been brought to a head by Unilever’s decision to demerge its ice-cream division, including Ben & Jerry’s and Magnum, later this year, with a likely primary listing in Amsterdam. Unless Unilever finds some way to amend the agreement, which seems unlikely given the indignation of Ben & Jerry’s directors, the new investors will have a lot to swallow.

As in all family disputes, including corporate ones, the two sides do not even agree on who started it. Unilever blames Anuradha Mittal, chair of the independent board, whom it claims took Ben & Jerry’s social activist history (it signs emails “Peace, Love and Ice Cream”) and in 2021 turned it to Palestinian causes, including a call for a permanent ceasefire in Gaza in January 2024.

Mittal dismissed this when I spoke to her this week. “I wish I could take credit for it, but it’s been in the company’s DNA for 50 years,” she said of Ben & Jerry’s history of peace activism. She cited the agreement giving the board responsibility for “preserving and enhancing the objectives of the historical social mission of the company”. There was a lot of room for manoeuvre there.

Ben & Jerry’s directors suspect opposition from another kind of activist: Nelson Peltz, who joined Unilever’s board in 2022 to push for it to boost shareholder returns after a lacklustre period. Unilever’s confident talk of purpose-led brands being at the heart of its strategy has gone quiet and impatience is rising: it abruptly ousted Hein Schumacher as chief executive in February.

One lesson for acquirers is to read the Ben & Jerry’s deal with care and never sign anything like it themselves. While Unilever is portrayed as the ruthless capitalist of the affair, an astute pair of entrepreneurial hippies clearly saw it coming. They extracted an amazing deal, although Ben Cohen, one of the eponymous co-founders, said later that he regretted the sale.

The heart of the problem is that the agreement made a distinction that was bound to break under strain. The board is the custodian of Ben & Jerry’s brand image, while Unilever is in charge of its “financial and operational aspects”. But the two are entwined, including in their dispute about selling ice-cream in occupied Palestinian territories.

Consumer goods companies should be wary of weakening their ownership rights in takeovers, although it makes sense to entice founders to stay on for a while to protect a smaller brand and to remain its face. The delicate point for lawyers to fix from the start is that an offer of autonomy is not indefinite: in the end, taking over a company has to mean just that.

As to Ben & Jerry’s, some of its fans believe strongly in its social mission but others buy the product because it is a premium frozen confection with a friendly image. An agreement that leads to constant legal disputes while customers try to eat ice-cream in peace is nearing its sell-by date. 

john.gapper@ft.com