Nestle India sits inside the majority of the 4,000-odd portfolios that Marcellus manages for its clients. This Indian subsidiary’s fate is obviously inextricably linked to its 160-year old Swiss parent, Nestle, the world’s largest food company which has been headquartered in Vevey from the day the company was created. Longevity apart, what Nestle has achieved in the past three years is very hard in the context of the FMCG industry – under a new CEO Mark Schneider, Nestle has managed to accelerate its sales growth in recent years, something that its major rivals have struggled to do.
In this piece, Schumpeter gives its take on how Mr Schneider, the first outsider to be hired to run Nestle, has added zest to Nestle’s sales growth:
“Mr Schneider, a straight-talking German…is not prone to panic. But nor is he complacent. He came from outside the food industry, so sees it with fresh eyes. …Most significant, he revived confidence in organic sales growth, a metric that had fallen at Nestlé from an annual 7.5% in 2011 to 2.4% the year he took over…But Mr Schneider swiftly found remedies.
The first was innovation. Thanks to e-commerce, small upstart brands were able to elbow aside the behemoths and sell directly to consumers. He responded by forcing boffins to bring Nestlé’s ideas to market more quickly, often digitally…New ideas he cherishes include allergy-busting cat foods and vegan burgers. Second, he was quick to strike transformative deals. Within six months of licensing Starbucks coffee in 2018, Nestlé had already launched 24 of the chain’s products. Third, he bought and sold companies, adding to fast-growing nutritional-health businesses and selling down pedestrian ones such as ice cream in America and packaged meat in Europe…
Nestlé has sped up growth in other areas, too. It is moving relentlessly upmarket. Last year the share of sales from premium products rose to more than a quarter, including items with naked snob appeal such as “flat white over ice” Nespresso pods. It has joined the craze for plant-based foods and other healthy fare…On December 3rd it said it would invest SFr1.2bn ($1.3bn) over five years to help its farmers improve their soils as part of a SFr3.2bn effort to combat climate change. It has also pledged to make packaging recyclable or resuable by 2025.”
This revival at Nestle has broader significance especially in light of Kraft Heinz’s travails in recent years because it suggests that conventionally well managed companies, rather than private equity firms like 3g, might do a better job of generating stable long term returns.

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Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.

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