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Nestle reorganises infant nutrition business

Reuters  |  LONDON/ZURICH 

By Martinne Geller and Silke Koltrowitz

LONDON/ZURICH (Reuters) - Nestle, the world's largest packaged food firm, said on Wednesday it would reorganise its infant nutrition business to improve performance, five months after the new CEO listed the category as one of its priorities for growth.

The Swiss maker of Gerber baby food and Illuma formula will appoint regional managers for the business to address local trends faster. Rival Unilever took a similar step, with business heads for different countries.

The changes come as global consumer goods groups like Nestle, Unilever and Procter & Gamble are under intense investor pressure to boost profit margins as sales slow from people migrating to smaller, independent brands.

Infant nutrition is a key battleground for and its rivals Danone and Reckitt Benckiser, which bought Enfamil infant formula maker Mead Johnson.

Big established brands still retain consumer trust that they have lost in other areas of packaged food, particularly in China, a major focus for future growth due to growing affluence and a policy to allow two children per family instead of one.

has come under pressure to shift gear from activist shareholder Third Point, which in June revealed a $3.5 billion stake. has satisfied some demands, such as by buying back shares and setting a margin target.

said it would manage some areas of infant nutrition globally via a "strategic business unit" for innovation, quality management, compliance and global manufacturing capacity.

But it scrapped the role of a global nutrition head to be replaced by three regional business heads. Current Nutrition head Heiko Schipper leaves at the end of 2017, to lead Bayer AG's consumer health unit.

already manages most of its businesses regionally, with the exception of a few areas, such as bottled water, Nespresso, Health Science and Skin Health.

"The new organization will allow Nestle's infant nutrition business to deliver accelerated organic growth and realize further efficiency gains," said.

"The more agile and efficient structure will enable to respond faster to rapidly changing local consumer preferences, evolving regulation, and customer and channel demand for tailor-made solutions."

GROWTH IN CHINA

is the world's biggest infant formula maker, with about 22 percent of the market last year, according to Euromonitor. It is also the leader in the key Chinese market, which is changing rapidly due to the rise of "mum and baby shops" and new federal regulations that go into effect in 2018.

The market has temporarily slowed before implementation of the new rules as wholesalers and retailers reduce stocks, but Danone said strong sales in China contributed to a 4.7 percent rise in underlying third-quarter like-for-like sales.

Chief Executive told investors in September that China's two-child policy taking effect and a stronger focus on quality would help in China. "We are reasonably optimistic when it comes to 2018, 2019," he said.

Schneider said in June he would focus the company's capital spending on particular high-growth categories including coffee, petcare, bottled water and infant nutrition.

The company also said Stefan Catsicas, its chief technology officer, was leaving "to pursue entrepreneurial and venture capital activities outside Nestle". He will be replaced by Stefan Palzer at the start of the year.

Stefan Palzer has been head of the Research Center since 2016.

shares, up about 15 percent this year, were down slightly at 83.85 Swiss francs at 0908 GMT.

(Reporting by Martinne Geller; Editing by Jason Neely and Edmund Blair)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, November 15 2017. 17:06 IST
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