Nestle's new chief expected to drive health expansion through M&A

Tue Jun 28, 2016 7:11am EDT
 
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By John Revill

ZURICH (Reuters) - Nestle's (NESN.S: Quote) surprise appointment of former Fresenius (FREG.DE: Quote) chief Ulf Mark Schneider as its new CEO could trigger a series of acquisitions by the Swiss food giant to further its ambitions in nutrition and medical foods.

Shares in the company rose 3.5 percent to 73.60 Swiss francs on Tuesday as analysts and investors digested the previous day's announcement of Nestle's first external hire as CEO in nearly a century and the potential for expansion of its relatively small but highly profitable health and wellness business.

In his 13 years at the helm of German healthcare company Fresenius, Schneider oversaw a series of deals that brought a twelvefold increase in net income. Nestle, meanwhile, has been laboring with faltering progress in its traditional food business, missing growth targets for the past three years

"It is striking that Nestle hasn't gone for a CEO from the consumer goods sector," said Jean-Philippe Bertschy, an analyst at Bank Vontobel in Zurich.

"It shows Nestle really wants to transform the business and not just do a little bit of health and wellness on the side."

With estimated sales of about 4 billion Swiss francs ($4.09 billion) out of Nestle's total 88.8 billion francs in 2015, the health business is seen as faster growing and more profitable than Nestle's traditional food and beverage operations, which include Nescafe instant coffee and KitKat chocolate bars.

The integration of Nestle's health science and skin health divisions, which will report directly to Schneider rather than operating as standalone businesses, was described as a positive development by Bertschy.

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Ulf Mark Schneider, chairman of the management board of Fresenius SE attends the company's annual news conference in Bad Homburg near Frankfurt, Germany, February 25, 2015.     REUTERS/Ralph Orlowski/File Photo