Dive Brief:
- Activist investor Daniel Loeb is calling on Nestle to make more changes in a letter to investors on Monday, according to the Wall Street Journal. Loeb’s Third Point hedge fund acquired roughly a 1.25% stake in the Swiss company in June of 2017.
- Mr. Loeb once again reiterated his previous suggestion that Nestle sell its large stake in cosmetics company L’Oreal. He also wrote that the chocolate company could make more changes, including selling its skin-health business, and questioned Chief Executive Mark Schneider about recent acquisitions.
- The billionaire investor acknowledged steps Nestle has already taken since he sunk $3.5 billion in the company, including new board appointments and plans to increase margins and stock buybacks.
Dive Insight:
Within the last month, Nestle announced new board members and agreed to sell its namesake U.S. confectionary business. They now may be wondering exactly what else investor Daniel Loeb wants them to do.
Since his Third Point LLC invested billions of dollars in the company, he has been clear that his focus for Nestle is to improve margins, innovate its core business and sell non-core assets.
Looking ahead at its food division, the manufacturer has written that these goals mean focusing on high-growth categories such as coffee, pet care, infant nutrition and bottled water.
To that end, the company has taken a majority stake in the Blue Bottle coffee chain and recently announced a partnership with Know Brainer Foods, a manufacturer of coffee creamers containing medium-chain triglycerides (MCTs) and organic grass-fed butter. Loeb brushed off these deals, as well as the sale of its U.S. candy business, as "a few small deals," according to the Wall Street Journal. Clearly, he’s not seeing as much change as he would like.
Loeb came to Nestle when the company was criticized as being spread to thin, while at the same time trying to keep up with changing tastes as consumers shift away from frozen, processed foods like Lean Cuisine and toward fresh, simple meals. Expect to see Nestle invest more in high-growth products, potentially in the snacking and clean label space.
The Swiss company had relatively flat sales in 2017, with some growth in coffee creamers and its U.S. frozen food and pizza businesses. These improvements were offset by declines in its confectionery and ice cream operations. Mark Schneider, Nestle’s CEO, said in October that these sales figures were expected and a key priority was to improve efficiency.
It wouldn’t be surprising to see Nestle explore the possibility of selling off French cosmetics company L’Oreal, a move Loeb has pressured the company to make repeatedly. Nestle also is expected to consider making tweaks to its food division, focusing on areas where it has dominant positions across a number of categories such as pet care, bottled water, frozen meals, infant food and ice cream. Its recent deals in the food space have been largely small, and it would be surprising to see Nestle make a major deal unless it could add to the fold a fast-growing product like Halo Top. The ice cream maker was rumored last summer to be exploring a sale.