Nestlé CFO shares plans for ‘sizable acquisitions’ in the future

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Dive Brief:

  • Food giant Nestlé plans to land more large-scale acquisitions this year, CFO Francois-Xavier Roger said Wednesday at the Barclays Global Consumer Staples conference. 
  • “We have been very disciplined, but that has not prevented us from doing sizable acquisitions, and there will be probably more in the future,” Roger said in the virtual fireside chat.
  • Roger’s comments follow a string of big-name acquisitions for the Vevey, Switzerland-based corporation. Last month, it announced its $2.6 billion acquisition of Aimmune, a biopharmaceutical company that makes a therapy “designed to help children reduce their allergic reactions to peanuts by exposing them to small but increasing amounts of the legume,” Food Dive reported.

Dive Insight:

Since 2017, when former healthcare executive Mark Schneider took over as global CEO, Nestlé has “aggressively overhauled its portfolio” to generate more growth, Food Dive reported last month.

Under Schneider’s leadership, Nestlé had accelerated its pace of innovation on portfolio growth, Roger said. “We have a different organization today, [with] much more emphasis on cost management, and a different capital structure.” 

Digital spend on e-commerce, advertising and publicity has also become doubly important under Schneider, he said.

“Over the last 18 months, we have clearly disposed of more assets than we have bought,” Roger said. “[But] it’s not just about going shopping because we have a strong balance sheet.”

In deciding whether to acquire a company, Roger said Nestlé, the world’s largest food manufacturer, has three main criteria it must meet. First, it must strategically fits with Nestlé’s nutrition, health and wellness focus. Second, it must be a cultural fit, sharing Nestlé’s same values. Third, it must provide a “proper financial return.”

“One of the KPIs is, [in] five to seven years, [whether] we can get a return on invested capital, ROIC,” Roger said. “This has been the limitation for some of the assets, but looking backwards at what we did not take over the last couple of years, I’m quite happy we didn’t go there. […] We need to be selective and disciplined in what we do.”

In recent years, Nestlé has been building a thriving health-science business, Food Dive reported. In June, it announced plans to purchase a majority stake in Vital Proteins, a maker of collagen bars, beverages, capsules and powders. Last year, it purchased vitamin company Persona, and, in 2017, bought nutritional product manufacturer Atrium Innovations for $2.3 billion.

It’s also expanding into the vegan and vegetarian market, investing heavily in plant-based brands including Sweet Earth and rolling out its own vegan items. 

“It’s one of the most important spaces Nestlé is investing in,” Ryan Riddle, R&D specialist of vegetarian meal solutions for Nestlé USA told Food Dive. “I don’t think that it’s a short-term fad we’re trying to chase; we really believe that it’s the future of food.”

While Nestlé has set the bar high on large-name acquisitions, including Starbucks and Nespresso, most of its competitors prioritize purchasing smaller brands, with plans to envelope them into their vast portfolios. Indeed, big food conglomerates spend billions each year acquiring smaller, niche food companies in an effort to expand their reach into popular snack or drink markets, CFO Dive reported in February.

In July, Nestlé said it was aiming for two to three percent organic sales growth this year, as demand for high-end pet food and health products continued through the second quarter, Reuters reported.

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