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By Martinne Geller
LONDON, June 4 Nestle has less
tolerance for underperforming food brands as its focus shifts to
more scientific businesses such as medical nutrition and skin
health that require deeper investments.
Paul Bulcke, chief executive of the world's largest packaged
food group, said on Wednesday its newer businesses, which
include injectable wrinkle treatments, were more complicated
than food and therefore required greater resources.
"That's a little bit the tension I have," said Bulcke, who
has led the Swiss company for six years. "If you really go into
the dimension of science ... the promise is big but the
pre-investment is a little heavier than reformulating a bouillon
cube," he said.
"We don't allow ourselves to have laggards because we don't
have the luxury anymore because we are investing for the
future," he said.
Nestle, home to thousands of products from Nespresso coffee
and Maggi soups to Kit Kat bars and Gerber baby food,
accelerated its push into the faster-growing, more profitable
skincare market last month, buying the rights to several
injectable wrinkle treatments for $1.4 billion.
It recently sold its PowerBar business and the bulk of its
Jenny Craig diet business and said there could be more
divestitures of brands whose sales growth, profit margins and
rate of return on invested capital pull down that of the whole
"We are living in a riskier place and going riskier places
strategically, like Nestle Health Sciences. That equals more
margin," Bulcke said. "To get higher margins, you have to take
out that which is dragging you down."
The Health Sciences business focuses on nutrition for people
that are sick or have special medical-related needs. Its focus
areas include aging, brain health, intensive care, paediatrics
and gastrointestinal health. The Skin Health division, based on
the February move to take over a venture it had with L'Oreal
, is different.
Bulcke said Nestle's sharper focus on fixing or divesting
weak brands and cutting out the number of product varieties it
sells has freed up valuable management time.
"We don't have stupid discussions about losers or have the
same discussion five times. You just say what you have to do and
clean up resources for it."
(Reporting by Martinne Geller in London, editing by David