The World’s Biggest Food Company Is Coming for Your Lockdown Cravings
(Bloomberg) -- Nestle SA Chief Executive Officer Mark Schneider skips his afternoon Nespresso, as genetic tests revealed his body processes caffeine only slowly, depriving him of sleep. He likes to start his mornings with a smoothie blitzed together from 10 ingredients after colleagues convinced him of the cocktail’s benefits to the immune system.
The German-born Schneider has taken the same methodical approach to refocusing the world’s largest food company on cleaner living. Since joining Nestle in 2017, he’s shifted the portfolio away from sugary snacks including Butterfinger chocolate bars and Haagen Dazs ice cream, while giving convenience meals like Stouffer’s a vegan makeover.
“There is a renewed interest in health and nutrition,” Schneider said in an interview. “I think this is here to stay, certainly throughout the later stages of this pandemic, and we believe also beyond that.”
Schneider can’t claim to have invented the company’s healthy push. It’s a concept the company has pursued for the better part of two decades under the stewardship of his two predecessors. And some rivals like Unilever NV and Mondelez International Inc., are also remodeling their portfolios around healthier options.
But Schneider has accelerated the transformation with the deepest overhaul in 30 years, harnessing developments from investor pressure for faster growth to changing consumer tastes to the Covid-19 pandemic that have changed the trajectory of the food industry. It’s a shift that’s moved the Swiss company ever further away from the business that long defined Nestle: snacks and convenience foods that are fun and easy to eat but not necessarily healthy.
“Nestle will have to perform a tightrope walk in the food segment as it balances appealing to both the health-conscious premium and the mass-market audience,” said Christian Zogg, head of equity and fixed income at LLB Asset Management in Vaduz, Liechtenstein, which holds Nestle shares.
In his first year at the helm, Schneider got unlikely support from activist investor Dan Loeb, whose Third Point LLC fund had built a stake in the company and demanded Nestle boost profit. Schneider responded by offloading the U.S. confectionery and ice-cream businesses as well as the skin-care subsidiary. In their stead he brought on assets from vitamins, supplements and food allergy treatments and sharpened the focus on coffee.
The consumer trend toward a healthier lifestyle has accelerated, most notably with vegan products infiltrating supermarket aisles and social-media accounts. Nestle was arguably late to the party. The company caught up with a vengeance, as Schneider acknowledges, only after U.S. rivals like Beyond Meat managed to make such offerings appealing to the mainstream, and now offers plant-based burgers and chicken nuggets.
And then, of course, there’s the pandemic, which has reshaped the way many people eat and drink -- initially often too much, as Schneider himself concedes.
“People really had a craving for comfort food during the hardest part of the lockdown, and now of course over time, they see that this would not be the new standard diet,” he said.
The attention to wellbeing and the immune system has revived interest in vitamins and supplements, poised to make the company’s health-science unit more important. It’s also made cooking at home a more attractive proposition, a trend Nestle is seeking to harness with its purchase last month of U.S. meal-subscription company Freshly, in a deal that values the business at $950 million.
Schneider’s drive is on display in Nestle’s Concept Studio in the Swiss village of Konolfingen. Here, interns, startups, students and scientists mingle to cook new dairy and alternative products that are both healthier for humans and the planet.
A plant-based milk alternative using fava beans, hatched in Konolfingen, promises close similarity to cow’s milk in taste and texture and will hit shelves in March. A dozen other ideas have been developed here, like Momentz, another plant-based drink using seeds and spices aimed at young flexitarians, or Drop of Life, a vegan liquid food supplement containing vitamin B12. Even if they don’t all end up in supermarkets, they share the goal of offering healthy products and getting them to consumers more quickly.
The trial-and-error approach also means that some products get swiftly pulled off shelves again if they flop. Take Nestle’s first attempt at a sugar-reducing technology that hollowed out the molecules in order to cut sugar by about a third without compromising the desired sweetness. The resulting Milkybar Wowsomes chocolate was discontinued after about a year because it didn’t offer the same creaminess of full-sugar chocolate, though the company’s not given up on sugar-reduction research.
Schneider said the shift isn’t about dropping everything considered unhealthy, but rather about a more conscious approach to the way we consume.
“If you’re committed to healthy food, it doesn’t mean that you have to abstain from everything that is indulgent,” Schneider said. “It’s important that these more indulgent products are being consumed responsibly, through the appropriate portion size and the labeling, putting you in a position to make an informed decision.”
©2020 Bloomberg L.P.