Value creation strategy: Nestlé targets organic platforms amid health push

04 Jul 2018 --- Nestlé is implementing an accelerated long-term value creation strategy. The company expects to see sustained future revenue growth from investing in its brands and innovation.

Speaking to FoodIngredientsFirst, Christoph Meier, Global Head of Media Relations at Nestlé says: “Consumer behavior and expectations are changing at a fast pace. Consumers are more interested in nutrition, health and responsibly as well as sustainably sourced ingredients. Organic foods have become the new norm. Therefore, Nestlé accelerated the repositioning of its portfolio and is investing in brands and products that appeal to consumers who look for healthy, convenient and delicious options. Recent acquisitions that illustrate this re-positioning include Sweet Earth and Blue Bottle Coffee. The company also uses its industry-leading CHF1.7bn (US$1.715bn) annual budget to research and develop attractive products.”

“Nestlé is more and more geared towards healthier foods and beverages that help enhance the quality of life. In line with this new trend towards healthier eating, consumers are prepared to spend more of their available income on good food. We expect sustained future revenue growth to come from investing in our brands and innovation,” explains Meier. 

“Nestlé will respond even faster to the rapidly changing consumer environment, which will eventually translate to a better financial performance of the company,” he adds. 

“We consider coffee, pet care, water and infant nutrition to be attractive high growth, high margin product categories. But we will continue to develop our other product categories,” Meier confirms. 

In just over a year, Nestlé has:
• Transitioned to a new CEO with a strong track record to lead the accelerated implementation of its Nutrition, Health and Wellness (NHW) strategy, under the full involvement and guidance of the Board, to deliver long-term shareholder value; 
• Accelerated the repositioning of the portfolio with a clear focus on its high-growth, high-margin categories. The company announced a global coffee partnership with Starbucks, concluded the acquisition of Atrium Innovations (a global leader in nutritional health products) and invested in brands such as Sweet Earth, Blue Bottle Coffee, Chameleon Cold-Brew and Terrafertil. Furthermore, Nestlé has executed strategic divestitures, including the US$2.8bn sale of its US Confectionery business, and is exploring strategic options, including a potential sale, for its Gerber Life Insurance business;
• Delivered revenue growth in a challenging environment, with volume growth at the high end of the food and beverage industry;
• Continued to invest in its brands and innovation to ensure sustained future revenue growth;
• Set a specific margin target and has already begun delivering ahead of expectations. The company is on track to meet its 2020 goals for margin improvement, operating profit, and structural cost savings; 
• Accelerated its restructuring and improved operational efficiency, leading to a corresponding margin improvement of +50 bps in constant currency in 2017; and; 
• Returned substantial capital to shareholders, including returning over CHF 10bn (US$10.08bn) in 2017 through dividend and share repurchases, and increasing its dividend for the 23rd consecutive year.

Nestlé has delivered strong total shareholder return over the long term (+135 percent total shareholder return in Swiss Francs over the past ten years) and continues to focus on creating sustainable shareholder value. 

Following its robust director selection process, Nestlé's shareholders recently elected three new independent directors, each with strong records of successfully navigating today's rapidly changing consumer environment and delivering results, according to the company. With these new directors, Nestlé has added seven new independent directors in the last three years.

By Elizabeth Green