Nestle reassessing portfolio, while Kellogg to cut jobs

Nestle reassessing portfolio, while Kellogg to cut jobs

"The marketplace is constantly changing and evolving and we must adapt," Kellogg's chief executive said last week as the cereal and snacks giant announced it would cut 7% of its global workforce.

The Special K cereal and Pringles snacks owner has drawn up Project K, a programme Kellogg believes will allow it to reinvest savings in its business to, as CEO John Bryant said, "gain momentum in our business and get back on our sustainable growth model".

In recent quarters, it has become clear Kellogg is a big name in a category under pressure, particularly in North America and parts of Europe. Breakfast cereal is still big business but sales volumes are stagnant as consumers look for healthier or more convenient options.

Kellogg has plans to spend some of the proceeds from Project K in developing its operations in emerging markets but the company's main priority is clear - cereal. "The primary focus of our reinvestment is to stabilise and rebuild momentum in our core businesses," Bryant said. "We believe we do that through brand building, innovation, nutrition over time. That's where we're focusing."

However, with parts of the cereal sector appearing in almost secular decline, Kellogg will have its work cut out driving growth. Could it instead look to M&A to boost its presence in growing segments - like US rival Post Holdings has done - this year?

Nestle is another giant of the sector reappraising parts of its business. Last week, the company announced a deal to sell the bulk of its Jenny Craig weight management business.

Private-equity firm North Castle Partners will take on the Jenny Craig business in North America, Australia and New Zealand. Nestle will retain the unit in France.

In recent years, Jenny Craig has been squeezed on two fronts. Consumers, feeling the pinch of the economic downturn, are turning to online weight management tools. Meanwhile, chief rival WeightWatchers has stepped up its competitive activity in the arena.

The financial details of the transaction were not disclosed. However, the general consensus suggests it is unlikely Nestle will have received the US$600m it paid for Jenny Craig in 2006.

Nevertheless, the deal comes as Nestle looks to become what CEO Paul Bulcke last month called a "more flexible, more agile, crisp" organisation - which of course begs the question: what else could the world's largest food manufacturer be looking to sell?

There have been reports Nestle is looking to offload sports nutrition business PowerBar, while analysts have also touted US frozen meals arm Lean Cuisine as another asset that could be put on the block.

Nestle is the latest major food manufacturer to look at shedding brands to focus on better-performing assets. Another major FMCG peer, Unilever, has been doing the same to its food business in recent years, has sold off assets this year and could offload others in the coming months. Unilever CEO Paul Polman calls the process "weeding and feeding" the company's food portfolio.

The job cuts and promise of fresh investment at Kellogg, as well as Nestle's desire for a more "crisp" business, have similar ambitions.