Nestlé to sell off underperforming brands
Nestlé is to sell underperforming culprits from its sprawling portfolio of 8,000 brands, a move that some analysts believe could see brands such as Jenny Craig and PowerBar sold off.
The world’s largest food maker slashed its revenue target for 2013 earlier this year after sluggish sales from its diet, ice-cream and frozen products in Europe stunted growth for the fourth consecutive quarter. It attributed the decline at the time to more price-conscious consumers, but revealed today (1 October) it had identified poorly performing brands that it planned to sell off after conducting a review of around 1,800 businesses.
Paul Bulcke, chief executive of Nestlé, declined to name the brands, but said there would be divestments for those that had been “sailing under the radar screen for too long without being part of the party.”
He adds: “We want to be in business, not in agony. The shortlists are there and now the action has to come. The timelines have to be wise, but action will come.”
Weight loss brand Jenny Craig has struggled for growth outside North America since Nestlé acquired the business in 2006. The brand tried to expand into Europe in 2010 but was forced to exit the UK market shortly after. In August, Nestlé revealed Jenny Craig’s performance was “very much below our expectations”. Energy bar brand PowerBar is also thought to be one of the brands that could be axed, according to Reuters.
Chris Brockman, senior global analyst for food and drink at Mintel, says the poor performances of Nestlé brands similar to Jenny Craig and PowerBar are the result of it focusing on its more lucrative nutrition, confectionery and water categories. The company has also not done enough to innovate around its energy bar and frozen brands such as Lean Cuisine to match the investment from rivals, he claims.
Brockman adds: “Given Nestlé’s nutritional focus for the future, PowerBar fits into what it wants to do but the brand hasn’t performed well in recent years. PoewrBar needs a lot of work and is reflective of old fashioned diet oriented brands which don’t resonate with what consumers are looking for now when it comes to managing their health. Customers want a more balanced approach to eating which has meant that brands like Jenny Craig and Lean Cuisine have gone out of fashion.
“Ice-cream is another area that Nestlé has struggled in. It was the global leader in ice-cream in 2006, but since then has gone backwards. Unilever with brands like Magnum has taken over the top slot and outside America, Nestlé has found it tough.”
The divestment strategy echoes a similar one used by rival Unilever, which has sought to sell off underperforming businesses in Europe and the US to focus on on its fast-growing shampoos and deodorants brands.