ZURICH — U.S. activist investor Daniel Loeb on Sunday ratcheted up pressure on Nestlé SA management to raise its financial returns and sell its stake in L’Oréal, criticizing Nestlé for what Mr. Loeb sees as a lackluster effort to revamp the packaged-food giant’s strategy.
Mr. Loeb’s criticisms, contained in a letter to Nestlé’s top management and a 34-page report, suggest that a raft of changes initiated by Nestlé in the past year — including a large share buyback, a marketing deal with Starbucks Corp. and investments in rapidly growing companies like Blue Bottle Coffee — have failed to satisfy the investor.
Mr. Loeb’s Third Point LLC owns more than $3 billion in Nestlé stock, or about 1.25% of its shares.
“Nestlé’s management is not moving quickly enough to exit underperforming and non–strategic businesses,” Mr. Loeb said in a letter to Nestlé chief executive Mark Schneider and the board of directors. He blasted a “muddled strategic approach” that doesn’t take into account changing consumer behavior.
Mr. Loeb said Nestlé should divest up to 15% of its sales and use the proceeds on acquisitions or buying back more shares. The time is right for adopting this strategy, he said, citing “this time of elevated multiples and strong strategic demand for some of its lower growth businesses.”
The company, he said, has also been “unable to articulate a compelling strategic rationale for continued ownership” of its 23% stake in L’Oréal.
Mr. Loeb disclosed his Nestlé stake roughly one year ago and pressed for major changes to improve its financial performance including share buybacks, selling noncore assets including L’Oréal and adopting a formal margin target.
Nestlé, in turn, adopted many of his proposals. Last June, it launched a roughly $20 billion share buyback. It sold its U.S. confectionery business in January and last year acquired Sweet Earth Foods, a maker of plant-based protein foods.
In May, it bought the rights to offer Starbucks coffee and tea in grocery and retail stores for more than $7 billion.
Nestlé has struggled with sluggish sales in recent years, as have other large consumer-goods companies that all face changing consumer tastes and difficulty raising prices.
“Although the Company has taken some steps consistent with our suggestions, the modest pace and magnitude of these changes suggest that Nestlé feels satisfied with its position,” Mr. Loeb said in his letter Sunday.
A Nestlé spokesman didn’t immediately respond to a request for comment.
Source : MTV
