Nestlé is embroiled in an existential battle with investors fed up with the Kit Kat maker's association with unhealthy products.
A $1.6 trillion investor group has sent a warning signal to Nestlé by introducing a resolution that would require the food maker to increase its health food sales targets over the next 10 years.
Nestle makes billions of dollars from household staples like coffee and powdered milk, as well as Kit Kat chocolate bars, sweet breakfast cereals like Cheerios and Golden Nuggets, and other unhealthy “snacks.”
This long-term dependency has been a problem for investors, who worry that the group's continued focus on unhealthy products exposes it to regulatory risk and changing consumer tastes.
But the cost of living crisis has raised warnings that a rapid shift to healthier food could burn a hole in the group's accounts.
Investors lose their sweet tooth
ShareAction CEO Katherine Howarth told Bloomberg that Nestlé has built a $285 billion empire on products that are high in fat, sugar and salt, and that they are making unhealthy products. accounts for three-quarters of the group's sales.
Activist investors have been urging Nestlé to move away from unhealthy products for some time, citing significant risks that suggest the junk food market is likely to shrink in the future.
“Sales are threatened by tightening public health policies such as sugar taxes and marketing regulations,” the activists said.
“Regulatory compliance creates legal risks. Increased social scrutiny creates reputational risks. Meanwhile, consumer demand for healthier alternatives is increasing.”
There are many sweet risks
Headwinds are fast approaching for the group behind Quality Street Sweets.
The global cost of obesity is expected to reach $3 trillion by 2030, according to the World Health Organization (WHO), and governments are taking a tougher stance against unhealthy products to combat the growing obesity crisis. Trying to.
Investors fear this could lead to new “sin taxes” and a wider crackdown by regulators on unhealthy foods. The UK is a particularly high-risk region because the cost of the country's health service is closely linked to the health of its population.
The rapid uptake of Novo Nordisk's weight loss drug Ozempic has raised new concerns that previously reliable consumers will turn away from Nestlé's products as their appetites wane. .
Nestlé plans to increase sales of “more nutritious products” by 50% by 2030, but SharePoint investors say this is not enough.
They also point out that Nestlé includes coffee and infant formula in its forecast, which are not traditionally considered health products by regulators.
Negotiations with Nestlé have stalled, saying SharePoint has been unfairly attacked and needs to “agree to disagree” with investors' assessments.
“Our goal is to responsibly address the diverse needs and preferences of all consumers and achieve success in all segments of our portfolio,” the spokesperson said. luck.
Nestlé's health initiatives have had mixed results
Nestlé has been working on new products and acquisitions to diversify its portfolio into healthy products.
Following the rise of Novo Nordisk's Ozempic, the group said it was working on developing “companion” products that might be of interest to shoppers cutting back on calories.
“When you eat less, you need more vitamins, minerals, and supplements,” says Schneider. “We want to make sure weight loss is supported. We want to make sure we limit the loss of lean muscle mass.”
The acquisition of health-focused British meal kit group Mindful Chef in 2020 was another part of Nestlé's strategy to focus on growing demand for health products.
However, the group has suffered a decline in sales in recent years, although sales soared as the acquisition coincided with lockdown mandates and a wave of customer demand.
The company's operating loss widened from 5.1 million pounds ($6.5 million) to 7.7 million pounds ($10 million) in 2022, with sales facing a double-digit decline.
Rising inflation in recent years has forced households to make difficult decisions on the supermarket shelves, with healthier, more expensive options appearing to be weeded out.
A survey conducted by BBC Good Food Nation last year found that 28% of Brits eat less nutritious food because it is more expensive than processed food.
Nestlé is therefore being squeezed on both ends, by impatient investors who want to exit the junk food sector that helped the group grow, and customers who are still unable to commit to the company's healthy products.
