Unilever sells Ben & Jerry's Israeli business to defuse BDS row

© Reuters. FILE PHOTO: Tubs of ice-cream are seen as a labourer works at Ben & Jerry's factory in Be'er Tuvia, Israel July 20, 2021. REUTERS/Ronen Zvulun

By Henriette Chacar

JERUSALEM (Reuters) -Unilever on Wednesday sold its Ben & Jerry's ice cream business in Israel to its local licensee for an undisclosed sum, aiming to smooth over a potentially damaging diplomatic row over the company's political stance.

The deal comes after the U.S. ice cream brand announced last year it would stop marketing products in the Israeli-occupied Palestinian territories, saying that selling there was "inconsistent" with its values. Under the new arrangement Ben & Jerry's ice cream will be available to all consumers in Israel and the occupied West Bank.

The episode highlighted the challenges facing consumer brands taking a stand on Israel's military occupation of the Palestinians, such as San Francisco-based Airbnb, which in 2019 reversed its decision to delist Israeli settlements.

The international boycott, divestment and sanctions (BDS) movement seeks to pressure Israel to abide by international law in its treatment of the Palestinians. Israel says such boycotts are discriminatory and anti-Semitic.

On Wednesday, Israel's foreign ministry called the Ben & Jerry's deal "a huge victory."

"We will fight delegitimization and the BDS campaign in every arena, whether in the public square, in the economic sphere or in the moral realm," Israel's Foreign Minister Yair Lapid said in a statement.

Last year, Israel condemned the sales boycott as "morally wrong" and said Unilever (NYSE:UL) would face "severe consequences." The consumer goods giant defended Ben & Jerry's autonomy, but said it was "fully committed" to Israel and would find a solution by the end of this year.[L1N2UL25W]

Unilever had said previously it did not support the BDS movement, and reiterated that stance in a statement on Wednesday.

The new owner is the brand's long-time Israeli ice cream licensee Avi Zinger, owner of American Quality Products. Zinger had sued Ben & Jerry's after its decision in the West Bank, saying the company illegally severed their 34-year relationship.

"The new arrangement means Ben & Jerry’s will be sold under its Hebrew and Arabic names throughout Israel and the West Bank under the full ownership of its current licensee," Unilever said.

A representative for the Vermont-based Ben & Jerry's said the company does not agree with Unilever's announcement and will no longer profit from Ben & Jerry's in Israel.

"We continue to believe it is inconsistent with Ben & Jerry's values for our ice cream to be sold in the Occupied Palestinian Territory," the representative told Reuters.

REACTIONS

Pension officials in at least six U.S. states had restricted or sold Unilever stock or bonds to protest the Ben & Jerry's decision, among them New York State Comptroller Thomas DiNapoli, Texas State Comptroller Glenn Hegar, and Arizona Treasurer Kimberly Yee. [L1N2RP1ZE] Representatives for all three told Reuters on Wednesday they would review Unilever's move.

Billionaire activist investor Nelson Peltz, who is joining the board of Unilever next month, was involved in the discussions to bring about the resolution, said Rabbi Abraham Cooper, associate dean of the Simon Wiesenthal Center, a human rights organization that supported the deal. Peltz is the chairman of the center's board of governors.

Peltz met with Unilever CEO Alan Jope in September before Trian Partners, the investment fund Peltz runs, bought any shares, to discuss the situation, a person familiar with the matter said.

Trian Partners commended the new arrangement in a statement, saying that "respect and tolerance have prevailed."

Ben & Jerry's and its independent board maintained the right to decide on its social mission when it was bought by Unilever in 2000. But Unilever said it "reserved primary responsibility for financial and operational decisions and therefore has the right to enter this arrangement."

Israel captured the West Bank, part of the territory Palestinians want for an independent state, in a 1967 Middle East war. Most countries consider Israeli settlements on Palestinian land to be illegal. Israel disputes this.

"The return of Ben and Jerry's to Israeli settlements, which were built on Palestinian land, exposes it to international legal accountability and its name will be on the United Nations blacklist of companies operating in settlements," The Palestine Liberation Organization's Wasel Abu Yussef told Reuters.

Omar Shakir, Israel and Palestine Director at Human Rights Watch, said the deal sought to undermine the "principled decision" to stop selling the ice cream in Israeli settlements.

"What comes next may look and taste similar, but, without Ben & Jerry's recognized social justice values, it's just a pint of ice cream," he said in a statement.

Ben & Jerry's Jewish founders, Ben Cohen and Jerry Greenfield, no longer manage the brand but are well known for their commitment to social justice. The company has recently expressed strong support for the Black Lives Matter movement, LGBTQ+ rights and electoral campaign finance reform.