The packaged food industry is currently thriving with rapid urbanization and changing lifestyle in both developed and emerging economies. At the same time, ubiquity of smartphones and the growing popularity of social media has escalated the awareness regarding healthy living and fitness. Obesity, diabetes, and heart diseases are on the rise and hence, consumers are now willing to spend a few extra bucks for food that are healthier, ignoring those that kick the taste buds.
Swiss food group, Nestle, seems to have caught the health and fitness trend, and after appointing healthcare veteran Ulf Mark Schneider as their first outside CEO in nearly a century, the company is rumored to be contemplating about selling off its roughly $900 mn confectionery business in the United States. Nestle’ confectionery business in the U.S. includes Butterfinger, BabyRuth, SkinnyCow, 100Grand, and Raisinets.
A Small but Significant Step
It must be noted that Nestle does not control its primary KitKat brand in the U.S., and their confectionery business in the country accounts for merely 1 percent of their overall sales revenue, gaining most profits from products such as instant coffee, baby food, and mineral water across the world. The CEO asserts that although the business accounts for a small chunk, it must mark a significant step towards a conscious capital allocation strategy.
Nestle Exploring Biotech and Medical Fields
In the recent past, Nestle has been pushing aggressively in the fields of health and nutritional science, investing or buying a wide range of biotechnology and medical devices firms, flexing its financial might in the food and medicine sectors equally. Along the same lines, the company has divested several underperforming business that didn’t tagged along with healthy living, such as Jenny Craig diet business, PowerBar snacks, and Nutrament drink.