While praising Nestlé CEO Mark Schneider for “taking steps to move the company forward,” activist investor Daniel S. Loeb is calling on the Vevey, Switzerland-headquartered multinational company to “move with greater urgency to complete its targeted level of adjustments” and take decisive action to dispose of what he regards as “ill-fitting businesses.”
While iconic frozen food brands are on his list, the most recent such disposal was the sale of Nestlé’s confectionery assets in the USA to Italy’s Ferrero. The $2.8 billion deal, applauded by Loeb as a “very attractive price,” included name brand candy bars Butterfinger, Crunch, Baby Ruth, 100Grand, Oh Henry! and Chunky.
Confectionery accounted for approximately $900 million in sales for Nestlé during 2016, representing about 3% of the company’s revenues in the USA.
Loeb’s New York City-headquartered Third Point LLC hedge fund, which invested $3.5 billion last year to buy 40,000 shares of Nestlé stock, issued a quarterly letter to investors on January 22 that reiterated the call for boosting sales growth and improving margins. It also questioned the company’s ongoing presence in the ice cream and frozen pizza segments, as well as its latest move in the consumer health care sector.
“We would like Nestlé to better explain to shareholders the rationale behind expanding further into consumer health care,” the letter stated. “The recent acquisition of Atrium Innovations (a vitamins and supplements supplier headquartered in Canada) and rumors that the company is bidding on larger assets in this category, have left some shareholders confused. Many products like ice cream and frozen pizza do not meet the company’s brand aspiration of being better-for-you…Nestlé defines itself as a company focused on nutrition, health and wellness, but many of its assets do not align with that vision.”
New Directors Tapped
Meanwhile, on January 18 Nestlé announced the nomination of three independent directors to its board: Pablo Isla, ceo of Inditex; Kasper Rorsted, ceo of Adidas; and Kimberly A. Ross, former cfo of Baker Hughes. Their names will be voted on during the company’s annual general meeting on April 12. At that time, three current directors, Andreas Koopmann, Steven G. Hoch, and Naïna Lal Kidwai will retire. The board also proposes the individual re-election of the chairman and the other current directors.
“As Nestlé advances its Nutrition, Health and Wellness (NHW) strategy for accelerated growth in targeted consumer products categories and for sustainable shareholder value creation, each of these nominees brings a unique depth of experience and expertise that will be directly relevant to Nestlé,” said Chairman Paul Bulcke. “We are thrilled to have Pablo, Kasper, and Kimberly support Nestlé through the next phase of our development. These highly accomplished individuals have strong records in successfully navigating today’s rapidly changing consumer environment with creativity and business acumen, leading to sustainable value creation.”
With the proposed nominees the full Nestlé board will comprise 14 members, of which 12 are independent directors. Including the proposed nominees, Nestlé has added seven new independent directors in the last three years.
Nestlé ranks as the world’s largest food and beverage business, with over $250 billion in market capitalization. Offering a portfolio of more than 2,000 brands ranging from global icons to local favorites, the company is present in 191 countries around the world.
