Nestlé should focus on better food and nutrition, says investor

Investor Daniel Loeb has called on the Swiss food and drink giant Nestlé to reconsider its priorities and focus on improving food and nutrition.

Loeb purchased a 1.25% share in Nestlé in June 2017, worth $3.5bn, and is currently head of the Third Point hedge fund. The investment put Nestlé under increasing pressure to rejuvenate growth, and a clearer business strategy will help achieve this objective, according to Loeb.

In a letter to the company, Loeb questioned Nestlé’s stake in the beauty business, mentioning L’Oréal and other businesses he regarded as ‘ill-fitting’ to the brand. “Today it is simply unclear how owning a minority stake in a beauty business makes Nestlé a stronger ‘nutrition, health, and wellness’ company,” he commented, in reference to Nestlé’s 23% stake in the French cosmetics company.

“We would also like Nestlé to better explain to shareholders the rationale behind expanding further into consumer health care. The recent acquisition of Atrium Innovations (a Canadian vitamin maker) and rumours that the company is bidding on larger assets in this category have left some shareholders confused.”

Nestlé outlines its current skin health strategy on its website, which suggests a greater investment in research and development in the beauty industry will help ‘develop products and services that meet specific needs of different parts of the population’ as well as addressing global issues such as rising healthcare costs.

Loeb also argued that Nestlé should commit to improving the health and wellbeing of its foods by developing safer practices for producing coffee, water and nutrition instead of unhealthy products such as frozen pizza and ice cream.

While Third Point addressed its concerns over the future direction of Nestlé in the letter, Loeb remained optimistic that the new CEO Mark Schneider will develop a more defined business plan in the coming years.

“While we recognise that Nestlé has certain unique cultural and structural constraints, we hope now that Dr Schneider has completed his first year and there is new blood on the board, the company is able to move with greater alacrity.”

Schneider’s first big move was to sell its US confectionary business to Ferrero in a $2.8 billion deal agreed on 16^th January 2018, marking a small divergence from unhealthy snack products.