{"id":7813,"date":"2013-08-27T12:00:52","date_gmt":"2013-08-27T12:00:52","guid":{"rendered":"http:\/\/www.flubu.com\/blog\/?p=7813"},"modified":"2013-08-27T12:00:52","modified_gmt":"2013-08-27T12:00:52","slug":"food-giant-nestle-may-slim-portfolio","status":"publish","type":"post","link":"https:\/\/www.flubu.com\/blog\/2013\/08\/27\/food-giant-nestle-may-slim-portfolio\/","title":{"rendered":"Food giant Nestle may slim portfolio"},"content":{"rendered":"

Sales slowdown pushes company to search for savings<\/strong><\/p>\n

Nestle SA, the world\u2019s biggest food company, needs to reignite sales that have disappointed investors for four straight quarters. One solution: Get smaller.<\/p>\n

The maker of Nescafe coffee and DiGiorno pizza said Aug. 8 that it\u2019s actively looking at its 8,000 brands and is seeking to identify the laggards after posting its weakest quarterly revenue growth in four years. Nestle has said it will struggle this year to meet its long-term forecast for annual sales growth of 5 percent to 6 percent, hurt by a deceleration in emerging markets, European weakness and sluggish performances from its diet products, water and frozen entr\u00e9es.<\/p>\n

The slowdown increases the urgency for Chief Executive Officer Paul Bulcke to tackle underperforming areas, especially as his peers get leaner.<\/p>\n

Unilever, whose ice creams and soups compete with Nestle\u2019s, has raised more than $1 billion selling assets this year to focus on faster-growing shampoos and deodorants, and CEO Paul Polman has said there is more to come. Kraft Foods Inc. and Sara Lee Corp. have both split in two, and Campbell Soup Co. is in talks to sell much of its European unit.<\/p>\n

\u201cWe\u2019re talking surgery, not amputation,\u201d Thomas Russo, a partner at Gardner Russo & Gardner and a Nestle investor since 1987, said in a phone interview.<\/p>\n

\u201cThey allocate capital to businesses with high-return prospects, and you would think that those starved of capital would end up being potentially available for sale. I would support that.\u201d<\/p>\n

Nestle\u2019s slowing growth has presented an uncommon quandary for investors, who for much of the past decade have bought the shares at a premium to food-and-beverage peers on a price-to-earnings basis. Now, the stock trades at a discount, according to data compiled by Bloomberg.<\/p>\n

The shares have risen 4.2 percent this year.<\/p>\n

The \u201cair of invincibility and reliability\u201d of the company has been eroded, Andrew Wood, an analyst at Sanford C. Bernstein, said in an Aug. 9 note.<\/p>\n

Selling a large food business would be a departure for Nestle.<\/p>\n

This year\u2019s enforced sale of infant-nutrition licenses in Australia and Africa was its biggest publicly disclosed divestment of a food-related asset since the 1997 sale of a canned tomato business to Del Monte Foods Co. for $197 million, according to data compiled by Bloomberg. In contrast, Unilever has sold Skippy peanut butter for $700 million and Wish-Bone salad dressings for $580 million this year alone.<\/p>\n

Unilever, the British-Dutch maker of Magnum ice cream, has sought to sell businesses whose sales are concentrated in Europe and the U.S. Nestle possesses similar assets, such as Jenny Craig diet centers, Lean Cuisine frozen meals, PowerBar snacks, and some of its bottled waters in North America.<\/p>\n

Nestle this year beefed up what it terms a \u201ccell methodology\u201d tool that analyzes 1,000 distinct business units, or \u201ccells,\u201d across the 194 countries in which it operates, to help decide which ones should get more or less investment. The system provides a \u201ccommon language across the organization,\u201d Chief Financial Officer Wan Ling Martello has said.<\/p>\n

For each struggling business, \u201cyou bring it into acceptable terms and you have a timeline for that, or you sell it off,\u201d Bulcke said in a March investor presentation. Nestle\u2019s investor relations director Roddy Child-Villiers declined to say how many of the 1,000 units are underperforming.<\/p>\n

Jenny Craig is \u201ca problem that we need to address,\u201d Martello told analysts Aug. 8. She declined to give a time frame for its turnaround. Nestle paid about $600 million for U.S.- based Jenny Craig in 2006, and in 2010 tried to expand it into Europe. That hasn\u2019t worked, as dieters shift to newer weight-loss remedies, so the business has exited Britain as it closes about 100 centers in the U.S. Tie-ins with Nestle\u2019s other nutrition brands have also not materialized, said MainFirst analyst Alain-Sebastian Oberhuber.<\/p>\n

Nestle\u2019s frozen-food unit has also come under pressure, executives said in a February presentation, because of a growing perception among U.S. consumers that frozen meals are less healthy than fresh fare. Sales of frozen dinners like Lean Cuisine \u201ccontinue to struggle for growth\u201d in 2013, the company said this month.<\/p>\n

Nestle has responded by banding together with frozen-food makers like ConAgra Foods Inc. to improve the perception of their products, and is also building a $53 million research and development center in Ohio. Innovations introduced so far have not moved the needle, Nestle has said.<\/p>\n

Another brand that could be sold is PowerBar sports bars, said Oberhuber, the MainFirst analyst. By selling, Nestle could take advantage of the most active year for North American food industry transactions in half a decade, according to data compiled by Bloomberg.<\/p>\n

On the beverage side, Nestle\u2019s bottled-water business gets about 80 percent of its $7.7 billion of annual sales from North America and Europe, and its operating profit margin is half that of Nestle\u2019s other units. Nestle\u2019s 65 water brands include premium-priced Perrier and San Pellegrino waters, while its Pure Life label is the world\u2019s biggest.<\/p>\n

\u201cIt is possible they would want to put all their focus behind Pure Life\u201d and ditch North American regional brands like Arrowhead and Deer Park, said James Targett, an analyst at Berenberg Bank. Potential buyers of those brands could include beverage companies \u201cwith big checkbooks\u201d like Coca-Cola Co., said Russo, the Nestle investor.<\/p>\n

Nestle\u2019s share of the $22 billion North American bottled water market declined to 22 percent in 2012 from 24 percent in 2010, according to data tracker Euromonitor.<\/p>\n

The Swiss foodmaker could always keep its existing portfolio. Doing so would display the same resolve it showed when it developed the Nespresso single-serve coffee machine, which took 15 years to become the company\u2019s fastest-growing brand.<\/p>\n

\u201cThey have parted with businesses before and I\u2019m sure they will part with them again,\u201d said Russo, whose Nestle shares comprise about 10 percent of the $6 billion in assets he manages. \u201cWhether Nestle can continue on their schedule or accede to Wall Street is the $64,000 question right now.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Sales slowdown pushes company to search for savings Nestle SA, the world\u2019s biggest food company, needs to reignite sales that have disappointed investors for four straight quarters. One solution: Get smaller. The maker of Nescafe coffee and DiGiorno pizza said Aug. 8 that it\u2019s actively looking at its 8,000 brands and is seeking to identify…<\/p>\n

Read More “Food giant Nestle may slim portfolio”<\/span> »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[38],"class_list":["post-7813","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-linked-news"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3u9vK-221","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/posts\/7813","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/comments?post=7813"}],"version-history":[{"count":1,"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/posts\/7813\/revisions"}],"predecessor-version":[{"id":7814,"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/posts\/7813\/revisions\/7814"}],"wp:attachment":[{"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/media?parent=7813"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/categories?post=7813"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.flubu.com\/blog\/wp-json\/wp\/v2\/tags?post=7813"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}