June 4, 2014 / 7:00 PM / 6 years ago

UPDATE 1-Nestle's scientific skew curbs its appetite for weak food brands

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By Martinne Geller

LONDON, June 4 (Reuters) - 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 group.

“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 Evans)

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