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Ben & Jerry’s accuses Unilever of breaching merger agreement

There is a chill wind blowing through the ice-cream aisles after Ben & Jerry’s sued its parent company Unilever, which also owns Wall’s and Magnum.

The complaint, filed in November in federal court in New York, alleges that Unilever blocked Ben & Jerry’s attempts to voice support for peace and a cease fire in Gaza, for student voices on campus supporting basic human rights, and for safe passage of refugees from Gaza, among other things.

“Unilever has repeatedly failed to recognise and respect the Independent Board’s primary responsibility over Ben & Jerry’s social mission and brand integrity, including threatening Ben & Jerry’s personnel should the company speak regarding issues which Unilever prefers to censor,” reads the lawsuit filed by lawyers at Houston-based AZA.

AZA lawyer Shahmeer Halepota said Unilever “has blocked Ben & Jerry’s statements, threatened to dismantle the board and sue its members, intimidated employees, and blocked charitable donations, including to organisations like Jewish Voice for Peace”. The litigation has been initiated to “protect Ben & Jerry’s three-part mission from Unilever’s unilateral erosion and to safeguard the company from Unilever’s repeated overreaches”, reads the lawsuit.

The document also highlights that social justice and human rights have been “core” to the Ben & Jerry’s brand, which was bought by Unilever in 2000. The company has taken public progressive stances on issues such as migrant justice, LGBTQ+ rights, Black Lives Matter, GMO labelling and a variety of other economic and social causes affecting historically marginalized communities.

Ben & Jerry’s long history of activism

In an interview with Harvard Business Review (HBR) in 2021 to explain its reaction to the murder of George Floyd by police in 2020 and the ensuing Black Lives Matter protests (“We must dismantle white supremacy” was the statement’s headline), the company’s activism manager Christopher Miller explained that “We do make a great ice cream. But what drives the loyalty and love for this brand are the things that we believe.”

Miller added: “We have this ongoing body of activism and advocacy that are rooted in our values. We have a team of social mission folks with an NGO or policy background paired with a world-class marketing team that knows how to connect with our fans and sell ideas. So, when things happen, we have this privilege, power, and ability to communicate.”

When asked how much the parent company, Unilever, got involved, he said “not a lot”, with the sales agreement having a certain level of independence “baked in”, including through the independent board of directors that Miller sits on.

This seems to be eroding. During the ongoing humanitarian crisis in Gaza, Ben & Jerry’s has “on four occasions attempted to publicly speak out in support of peace and human rights”, reads the November lawsuit. “Despite its contractual commitment to ‘[r]espect and acknowledge’ the Independent Board’s primary responsibility over Ben & Jerry’s social mission and essential brand integrity, Unilever has silenced each of these efforts.”

Scuffles between brand and parent company

Unilever’s spokespeople have rejected the claims being made and have said the company will “defend our case very strongly”.

This is the latest legal spat between the two. The ice-cream maker for example sued its parent company in 2022, again for breaching their merger agreement. In July 2021 Ben & Jerry’s announced it would be ending sales of its products in Israeli-only settlements on the Occupied Palestinian Territory. But a year later, Unilever announced that it had sold Ben & Jerry’s intellectual property in Israel and the Occupied Palestinian Territory to a distributor who would continue sales in the settlements; this was done without consultation with or consent from the Independent Board, according to litigation that was launched within days of the news breaking in June 2022.

In December 2022, Ben & Jerry’s and Unilever ultimately entered into a settlement agreement, which was expressly conditioned on Unilever respecting the Independent Board’s authority over Ben & Jerry’s social mission and brand integrity. These are the contractual obligations that have been breached according to the new November 2024 lawsuit.

“Unilever’s feigned neutrality is contradicted by its donations to other organisations as well as its partisan stances in conflicts such as Russia/Ukraine,” said AZA’s Halepota. Ben & Jerry’s has asked the court to enforce the original 2020 merger agreement and the 2022 settlement.

Ice-cream sales go soft for Unilever

The legal challenge comes amid speculation over the future of Unilever’s ice-cream business. Last year there were reports of approaches to private equity firms to gauge interest in brands including Ben & Jerry’s and Magnum. These plans have, according to a November report in the Financial Times, been abandoned.

Those familiar with the process told the FT that “the size and complexity of a potential deal was a major obstacle”, as were factors such as performance, logistics, and the recent stance by Ben & Jerry’s founders over the conflict in Gaza.

In its financial results for the first half of 2024, Unilever said performance in its ice-cream business “remains below our ambition” having been impacted by a “soft start” to the European key season and “challenging market dynamics” in China. Volumes and prices for in-home ice-cream were flat, while out-of-home grew low single digit driven by price.

Wall’s grew mid-single digit with positive volume and price; Ben & Jerry’s was slightly up, while sales of Cornetto were adversely affected by the decline in China. Magnum launched its new ‘Pleasure Express’ range with three variants: Euphoria, Wonder and Chill.

Unilever said: “Ice-cream continues to focus on operational improvements, including service and optimising promotions, while continuing to drive investment behind our brands and innovations.”