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Laura Magee, associate partner at operations transformation consultancy Argon & Co, reflects on the recent flurry of spin-offs in the food and drink industry, sharing her considerations for CEOs of newly spun-out businesses on making the transition to ‘single life’ as seamless as possible.

The appetite for divestitures in the food and beverage industry is growing, with a string of corporate divorces recently making the headlines: from Unilever’s plans to spin off its ice cream business, to Danone recently selling off its organic dairy business.

Changing consumer spending stemming from the pandemic and cost-of-living crisis has forced many companies to reassess their costs, returns on investments and supply chain strategies – leading to many firms separating ties.

For the newly defined business, this opens up huge opportunities to redefine their supply chains, enable quicker decision-making and develop a stronger workplace culture. Freed from the larger parent company, spun-off firms can be more responsive to market changes and tailor strategies to meet customer demands – positioning them as nimble players in their industries.

However, separating from the parent company can also come with teething issues as they look to disentangle their operations. Navigating this transition successfully starts with having a defined plan of action in place to avoid the turbulence of a messy breakup.

Splitting up operations

This transition to standing solo is a golden opportunity to reevaluate and potentially reconstruct the supply chain to be leaner, more sustainable, and aligned more closely with the new company’s objectives. Actions could include investing in technology for improved demand forecasting, optimising distribution routes, forging new partnerships, or building deeper relationships with existing core suppliers to embed positive changes into firms’ value chains.

However, to ensure optimal performance in their redefined supply chains, the spun-out firm must obtain the necessary data from the parent company to be able to operate post-divestment. Maintaining strong lines of communication with the parent company ensures that no vital data slips through the net.

What’s more, conducting a thorough data audit will enable firms to determine what information is essential for operations, providing clarity on the key data required for traceability and visibility throughout the entire supply chain.

By prioritising data integrity and accessibility from the outset, as well as sustaining an ongoing dialogue with the parent company, divested firms can uphold the highest degree of transparency across their supply chains.

This transparency is also a critical part of the puzzle to integrate sustainability into the day-to-day operations of newly spun-off firms. These companies have a prime opportunity to reevaluate their supply chains and redesign their processes to ensure they align with sustainable practices and regulations. Improving traceability ensures that firms have better visibility into both their tier-one and sub-tier suppliers, helping to stamp out unethical labour practices or environmental-related risks. Building ethical and sustainable operations not only benefits the firm within its own four walls; it also benefits society at large.

With new freedom from the larger company, divested firms’ operations can thrive post-breakup – enjoying the benefits of streamlined operations, greater autonomy, and an enhanced competitive position.

Embracing a fresh start in workplace culture

Alongside the operational benefits, newly divested food and drink firms can also seize this transition as an opportunity to establish a strong, independent corporate identity – liberated from the constraints of the larger organisation.

Divested firms can feel like a shadow of the previous company: a mere continuation of the parent firm. With many familiar faces, and the same processes and ways of working at first, employees at spun-off companies can sometimes feel disengaged with the independent venture, feeling as though it is just a lesser offshoot of its predecessor.

However, effective leadership and a strong change management approach play pivotal roles during the transition phase, helping to motivate employees and build a distinct corporate culture. Focusing on transparent communication and prioritising people and culture ensures its people feel valued, engaged, and committed to the success of the divested organisation.

Moving on from the breakup

The food and drink industry continues to see a burst of activity in mergers, acquisitions, and divestitures. Firms like Unilever frequently make acquisitions and disposals, so have a tried and tested method for this transition period. However, it ultimately falls upon the divested company to chart its course post-divestment, deciding its strategic priorities as an independent firm or as part of another entity.

Firms that thrive the most post-divestment ‘breakup’ are the ones that have a thorough plan in place for the transition period and embrace the newfound freedom that operating as an independent entity can bring with open arms.