Loeb lobbies Nestlé to correct strategy, sell L'Oreal stake

Nestlé shares have fallen 10% since the announcement of Loeb Mark Schneider is facing more pressure after he resisted the biggest demands of the activist. While he made some acquisitions and announced a major buyout, he did not design the wholesale makeover that Loeb is now asking for.

"We do not believe the company is up to the job Today, Nestlé does not fully appreciate the rapid changes in consumer behavior threatening its future, "Loeb said in a letter to the board of directors on Sunday.

Start of trading on Monday. L'Oréal dropped 0.9%. A Nestlé spokesman said the company had no immediate comment.

"There are too many examples of missed opportunities to claim that Nestlé's organization is well-suited to current markets," said Loeb. "We believe that the company should simplify its overly complex organizational structure and divide into three divisions organized around beverages, nutrition and groceries to enhance focus, agility and accountability . "

Schneider's principal actions since his appointment:

• Set Nestlé's first fixed profitability target, with an operating margin of 18.5% in 2020 (still less than Loeb suggested and lower than that of the previous year). Unilever)
• Launch of a stock repurchase program of 20 billion francs
• Increased concentration on Nestlé's activities in the coffee, pet food sectors , nutrition and bottled water
• Acquisitions include $ 2.3 billion for the food supplement manufacturer Atrium Innovations and $ 7 billion for the right to sell grocery products under Starbucks brand
• Divestment of 2% of sales turnover through the sale The chocolate operations in the United States and the exit of the insurance business of Gerber

Loeb said that the # 39; entrepr It has not demonstrated the urgency required since the publication of its own plan in September. Third Point also presented its own strategy to improve Nestlé in the presentation which advocates, among other things, the divestiture of some brands of frozen products and other products that do not fit with its broader strategy.

"We believe that Nestlé should sell 15% of sales, either through sales, spin-offs or other methods, in order to better align the portfolio with the main categories. The company's monetary policy in L'Oréal should be sold since the board remains unable to articulate a long-term strategic justification for its ownership, "he declared

. will allocate 10% of total sales.While selling chocolate business in the United States, Schneider said that the company is engaged in the category in the rest of the world, where its business is more profitable. on many occasions calls for the sale of the Oreal Stake

According to Edward Edward Jones, an analyst at RBC Capital Markets, Loeb faces obstacles in his attempt to get Nestlé to change. said that the participati Third Point's, which is about 1%, may be too small to force rapid changes.

President Bulcke presided over a "long period of underperformance, seems too comfortable with the status quo."

He said that it is "striking" that the council Does not include any members from outside with experience in the food and beverage industry.

Schneider, the first incoming Nestlé CEO from outside Nestle a century ago, has not made any major changes to the direction.It has shown signs that the company has no more sacred cows, however, with measures such as 39, a plan to remove 500 jobs in Switzerland, the largest restructuring of the company on its home market.

– With the help of Lisa Pham

( Updates with commentary on the Chairman in the second paragraph. )