Focus: Nestle Health Science sneaks under the radar
Nestle sees the world's health challenges as investment opportunity
Nestle's health science division has continued to motor below the radar in the first half of 2012 and the group is confident of a bright future for the unit.
For the first six months of 2012, Nestle Health Science reported double-digit sales growth in both North America and emerging markets. The food and nutrition giant does not give specific sales figures for the two-year-old division, which is underpinned by its own research institute.
Nestle does, though, remain confident that efforts to carve a third way between nutrition and pharmaceuticals will pay dividends in a world facing growing health challenges from non-communicable diseases and, in the developed world, ageing populations.
"We will soon be in a world where people know their gene type like they know their blood group," the president and CEO of Nestle Health Science, Luis Cantarell, told the British Business Embassy summit on retail, food and drink yesterday (9 August).
It's all part of a grassroots transition for a company that built its name on the likes of Nescafe coffee and Kit Kat bars. And the change is being driven by Nestle's view of global health challenges as an investment opportunity.
Cantarell cited estimates that, by 2020, one fifth of the UK's population will be over 65 years of age and around three out of five deaths worldwide will be due to so-called chronic diseases, such as heart disease and diabetes.
"Health systems will go bankrupt," Cantarell told the London audience. "We are convinced that nutrition is part of the solution."
In addition to what Nestle terms "personalised science-based nutrition", Cantarell said: "We are committed to making nutrition a well intregrated part of medical treatment."
Last month, Nestle acquired an undisclosed stake in US firm Accera, which produces Axona, a "medical food" that is used for "the clinical dietary management of mild to moderate Alzheimer's disease".
In 2011, the Kit Kat maker also acquired Prometheus Laboratories, which is prominent in research on inflammatory bowel disease.
Health claims rules are necessarily a big factor for the growth of Nestle's medical nutrition wing. Rather than deregulation, however, Cantarell is keen to see stronger legislation as Nestle builds its armoury in personalised nutrition.
"We would welcome European Food Safety Authority efforts to be more tough on regulation [of health claims]," he said. Put bluntly, he wants to see weak claimants weeded out. "This is not a gimmick for us," he said.
In a recent report on investment opportunities arising from the global obesity epidemic, Bank of America Merill Lynch highlighted targeted nutrition as a key growth area. "Global obesity is a mega-investment theme for the next 25 years and beyond," said Sarbjit Nahal, equity strategist at the bank's global research division.
For Nestle, it looks likely that its Health Science division will continue to rely strongly on organic R&D spend and small acquisitions. At its first-half results conference yesterday, group CFO Wan Ling Martello ruled out the prospect for major acquisitions for Nestle for the forseeable future, following the $11.85bn deal for Pfizer's infant nutrition business in April.
However, Martello added, bolt-on acquisitions, are still very much on the cards and Nestle could follow its recent health science acquisitions with more deals.
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