#1 Nestlé: Touching up its portfolio
For the last couple of years, Swiss-based food giant Nestlé has been busily adding to its already diverse product portfolio.This activity, which touches on several of Nestlé’s major product lines, has helped keep Nestlé at the top spot, by far, in Food & Beverage Packaging’s list of food processing companies. Nestlé is one of the world’s most diverse food companies, with products that include candy, pasta, pet food, frozen meals, ice cream and more. (Nestlé also has a strong presence in beverages as well. For a profile of the company’s beverage operations, see p.44.)
Some of the company’s more notable recent moves include:
• A $5.5 billion purchase of the Gerber brand from Novartis last year, making Nestlé the world’s largest baby-food company.
• A long-term supply agreement with Swiss chocolate manufacturer Barry Callebaut, under which Callebaut will supply most of Nestlé’s raw chocolate and will contract-manufacture some of Nestlé’s products for sale in Russia.
• The 2007 purchase of Russian chocolate manufacturer Ruzskaya Confectionery Factory.
• The purchase of Switzerland’s Mövenpack Group, a maker of ice cream and other products, which will open up markets for Nestlé in Egypt, Finland, Germany, Norway, Sweden and Saudi Arabia.
Nestlé is a firm believer in partnerships. It has long-standing partnerships with General Mills for ready-to-eat cereal in more than 130 countries, and with Coca-Cola for ready-to-drink tea and coffee. The company is currently being mentioned as a possible candidate for a partnership with troubled rival candymaker Hershey.
Nestlé, of course, has been under the same pressure from commodity prices as the rest of the food industry, especially in dairy prices, which are necessary for ice cream, milk chocolate and certain beverages. But the company has been soaring above those problems, consistently outperforming analysts’ expectations, with a 29% increase in food-only sales from 2006 to 2007. Annual sales of all products are forecast to rise another 7.5% in 2008. The company recently announced a 10 for 1 stock split.
In terms of its major product categories, Nestlé announced gains for the first quarter of 2008 of 4.6% in milk products and ice cream, 1.2% in prepared dishes and cooking aids, 2.1% in confectionery and 3.9% in pet food.
One of the biggest changes in the food industry in general is the growing demand in developing countries for processed food. Nestlé, which has always had a strong presence in the developing world, is in a good position to benefit from this emerging market, with Bulcke saying he foresees up to 50% of the company’s sales stemming from developing nations all over the world (up from about one-third today).
Early this year, Nestlé announced plans to establish a Chocolate Centre of Excellence at its main chocolate facility in Broc, Switzerland. This R&D facility will be entirely dedicated to premium, luxury chocolate, and will include packaging design as one of its strategic priorities.
One packaging innovation Nestlé unveiled this year was a stick pack for Nescafé Tasters Choice, its popular instant coffee. The stick packs are made from high-barrier laminated film and boast an easy-open feature that does not involve notches. F&BP
