Nestlé’s well-known food and beverage portfolio could one day be a major beneficiary of insight the CPG giant is amassing in nutritional products such as vitamins, minerals and supplements.
“There's a great opportunity for us to think about how the brands can complement each other, and how the science that we learn within this space can complement things that are done within the broader Nestlé portfolio,” Don Kerrigan, CEO of Nestlé Health Science U.S., said in an interview.
Nestlé Health Science U.S., which launched more than a decade ago, boasts a portfolio that includes brands such as Garden of Life, Vital Proteins, Nature's Bounty and Orgain. The division posted about $4.2 billion in sales in 2022, a small fraction of the $103 billion recorded by its Switzerland-based parent Nestlé.
Nestle, the world’s largest food company, owns an expansive portfolio that also includes food and beverage brands such as Lean Cuisine, Nespresso, Sweet Earth, S.Pellegrino and Hot Pockets.
Nestlé gained billions of dollars following the divestiture of ice cream, candy and much of its water businesses in the U.S. It invested some of the proceeds into products designed to increase its Health Science division. It’s a path that’s not totally unknown to Nestlé, a Switzerland-based company that started 157 years ago when founder Henri Nestlé created one of the first baby formulas.
In recent years, Nestlé Health Science nabbed a majority stake in Vital Proteins, a maker of collagen bars, beverages, capsules and powders; a majority stake in Orgain, a producer of protein powders, shakes and bars; hydration supplement manufacturer Nuun; and nutritional supplement provider The Bountiful Co, among other acquisitions.
These brands significantly expanded the segment’s portfolio, which already had Boost nutritional shakes and drinks, as well as Carnation Breakfast Essentials.
Today, Nestlé Health Science has an enviable portfolio spanning 55 brands, many of them No. 1 or No. 2 in their category, according to the company. So far, these offerings have a small presence in traditional food products, with Orgain and Vital Proteins possessing bar options.
Kerrigan didn’t speculate on where his brands could play with other items owned by Nestlé. The former Pfizer executive said his team works closely with other divisions at Nestlé to identify opportunities where his nutritional and wellness brands could work.
He pointed out Vital Protein, which is often used in coffee, as the type of area the company could look into. Nestlé’s coffee brands include Nespresso, Nescafe, Blue Bottle and Seattle’s Best.
Kerrigan said the health and nutrition space is highly fragmented, with many manufacturers having share hovering in the low single digits or lacking meaningful scale. This creates an opportunity for a large company like Nestlé. For example, Nestlé Health Science has about a 17% market share at Whole Foods, with the grocery giant working with an estimated 100 or more vendors on dietary supplements and health and nutrition products, he said.
Retailers eager to save money and boost efficiency could value partners, such as Nestlé Health Science, that offer a diverse portfolio. The Nestlé division can use its scale to not only grow and expand distribution but bring the scientific insight it has collected and apply it to multiple brands.
As consumers keep a closer watch on what they eat and drink, Nestlé Health Science has “multiple paths for growth,” Kerrigan said. “We have a large portfolio of brands that also has the opportunity to operate more expansively in many cases than where they are today.”
Nestlé Health Science also remains on the lookout for acquisitions that could “round out the portfolio” rather than prioritizing building scale as it has in the past.
Kerrigan said his division is looking for products or technologies where it is underpenetrated, or that it can’t reach with one of its existing brands. The CPG executive hinted that one such area could be in dietary supplements that provide the consumer with emotional benefits like addressing anxiety.