Nestle May Cut Ties With Jenny Craig
By Sam Lewis
Food giant considering the sale of underperforming product lines
Tuesday, Oct 1 brought an announcement from Nestle CEO Paul Bulcke that the food behemoth would be making some changes to its expansive portfolio of brands. The company has reviewed its current lines of products, identified those that are underperforming, and plans to sell them.
“If something doesn’t work, there are two ways to go,” says Bulcke. “Fix it, or get rid of it.” The selling of underperforming products marks a significant change in the way the company manages its enormous food empire. Historically, the company has made every effort possible to keep all products, adjusting strategies to make them perform better. However, Nestle has decided to experiment with slimming its product lines, concentrating on the more successful of its endeavors. “This is a mini-revolution for Nestle,” says Bank Vontobel analyst Jean-Philippe Bertschy.
In recent quarters, Nestle says its overall performance fell — the company stated its first-half 2013 sales did not meet Wall Street forecasts — which may have led to pressure on the company to make changes, including these sales. The company could be looking to sell its weight-loss brand Jenny Craig, which it just bought in 2006. That product line has experienced losses in sales due to fierce competition from online dieting sites, accompanied by the nationwide trend of tightening discretionary spending. Earlier in 2013, Nestle spoke of how to improve Jenny Craig after revenue forecasts of $425 million were down significantly from 2012’s $472 million.
Nestle isn’t the only food company that has sold, or plans to sell, underperforming brands. Unilever has taken this approach by selling Wish-Bone salad dressing and Skippy peanut butter earlier this year. Unilever’s intentions are also similar to Nestle’s, in that it wishes to focus on brands within the company that are successful.
However, Nestle’s CFO Wan Ling Martello says brands won’t necessarily be “put on the block.” That doesn’t mean that some brands aren’t in danger, though. More often than not, when a company says it is “evaluating strategic options,” it usually means a change is needed, and a sale is imminent. With 1,800 brands under its belt, it’s hard to imagine that Nestle would have a hard time finding a buyer willing to resurrect a struggling brand. For that brand, though, it has to wonder, “If Nestle couldn’t bring us prosperity, which will?” Or, maybe some of these brands will be better off in a company where they are not lost in the shuffle.