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Nestle was again posted by activist investor Daniel Loeb. In a letter, the strategy of the food company is criticized with extreme severity and described as "confused".
Third Point is far from being the largest shareholder of Nestle; With a share of 1.32%, the US hedge fund ranks only eighth after Black Rock, Vanguard Group, Capital Group and other major investors. But when it comes to imposing requirements on the Group's management, Third Point is in the vanguard. The investment firm, headed by Daniel Loeb, had already expressed it by the end of June 2017 and had asked Nestlé to launch a share buyback program – a premise that the company coincidentally or not, met a few days later. Since then, however, Nestle's course has not moved as Loeb would have liked. In the last 12 months, the stock has lost 8% while the SMI has fallen by 3%.
Call for More Speed
Given this unsatisfactory performance, it is not surprising that Loeb has a new letter to Nestlé Leadership asking them to act again; the period of gradual movement is over, he explains. Now, it takes a bolder and faster approach. Some of the arguments and instructions presented in the letter are well known; Nestlé's intention is to sell its 23% stake in the French cosmetics company L & # 39; Oreal, a request made by investors for years, and the idea of extending the program redemption of shares is not quite new.
Investor Daniel Loeb. (Photo: Andrew Kelly / Reuters)
What is new, however, is the aggressive tone of criticism that covers management led by CEO Mark Schneider. The strategy pursued by Nestlé is "confusing", according to the letter, and it is feared that the company may not be able to keep up with the changing habits of consumers. In addition, doubts are expressed as to the composition of the board of directors; None of the members, writes Loeb, has skills in foods and beverages that come from outside the company. Chairman of the Board of Directors Paul Bulcke, in charge of operational management until 2016; he has been responsible for the long period of slow growth and is now preventing the necessary changes.
The allegation of a "tangled" or inconsistent strategy relates in advance to Nestlé's product portfolio policy. The slogan "Nutrition, health and well-being", which serves as a guide to the company, no longer corresponds to reality. Only about 50% of the items could be subsumed under these terms; the rest is mainly low-growth, low-margin products. Schneider is expected to be more aggressive in restructuring the portfolio and reduce its total turnover (of 90 billion francs) by up to 15%. Finally, Loeb proposes to divide the group into three divisions – food, food and beverages – and subordinate them to the direction of a separate CEO.
Oil on the Wheels
Nestle reacted to these severe attacks Communiqué, which does not mention the letter, but notes the work of adaptation carried out and the objectives that were defined. There is nothing new about it, so do not expect Loeb's critics to be silenced soon.
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