For Nestlé, the world's largest food company, becoming more agile and competitive in the face of a changing consumer has meant showing that it's more than just one iconic product that has defined its business for much of its 152-year history.
"We're more than chocolate. We're a $27 billion operation in the U.S.," Rui Barbas, chief strategy officer with Nestlé USA, told Food Dive from the company's new U.S. headquarters near Washington, D.C.
Nestlé has been active in repositioning its business for much of the last year in an effort to stoke growth, focusing its capital spending efforts on high-growth food and beverage categories such as coffee, pet care, infant nutrition and bottled water. All this comes as Nestlé faces pressure from activist investor Daniel Loeb who has criticized the company and accused it of employing a “muddled strategic approach” that doesn't do enough to address changes in food consumption patterns among shoppers.
Barbas, speaking broadly of Nestlé's strategy, said the company is constantly tweaking its portfolio and acquiring resources that give it the best chance to win in spaces where it has products. The Swiss-based company has a broad portfolio that includes everything from Lean Cuisine and Toll House chocolate chips to Dreyer's ice cream and S.Pellegrino sparkling water.
Nestlé's growth plan incorporates a three-prong approach popular among CPG companies: internal innovation, partnering with startups and acquisitions. In the last year, Nestlé has invested in an accelerator program to support emerging food and agriculture startups and rolled out a pair of new products — a frozen food line called Wildscape and Outsiders pizza that pays tribute to under-respected regional styles — to market in less than nine months, much faster than products are usually introduced.
"As long as the consumer continues to evolve, you'll continue to see our portfolio adjusting to where the consumer is going," Barbas said. "I think the pace of change will further accelerate going forward and you will see a company like Nestlé picking up the pace as well as our own transformation."
A big part of that push has come through M&A. Nestlé shed its American candy business, which accounted for about 3% of its sales in the U.S., to Nutella owner Ferrero Group for $2.8 billion in January. The deal resulted in the divestiture of candies like Butterfinger, Baby Ruth, Crunch and 100 Grand. It took a stake in Blue Bottle Coffee, purchased Chameleon Cold-Brew and paid $7.15 billion to Starbucks to sell the chain's coffee beans and drinks in grocery stores and other outlets around the world, further cementing its footing in a segment where it already had popular brands such as Taster's Choice, Nescafe and Nespresso.
Nestlé also bulked up its exposure in plant-based foods after it snapped up Sweet Earth for an undisclosed sum last September. Barbas said the company could have done some work with its own brands, but purchasing Sweet Earth gave it a more immediate and broader presence in the fast-growing segment. It also allowed Nestlé to tap into the expertise amassed by Sweet Earth. Six months after the deal, Nestlé, which owns pizza brands such as Digiorno, Tombstone and Jack's, introduced a cauliflower crust pizza under the Sweet Earth banner.
Barbas said the company is noncommittal about the size of companies it acquires as long as it gets Nestlé closer to products that are in demand with consumers.
"We are no foreigners to acquisitions and to M&A and it’s part of managing a big organization,” he said. "There are opportunities that present themselves to us when it comes to acquisitions within the company … I don't think there is anything that precludes us from strategically say[ing] no to a big transformational [deal]. It can happen.”