Nestlé CEO Peter Brabeck-Letmathe believes a focus on nutrition, the food service sector and meeting the needs of consumers in emerging markets is central to the company’s long-term growth.
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Speaking at Nestlé’s AGM, Brabeck-Letmathe unveiled the three-plank growth strategy and said the company’s improved long-term profitability was a consequence of the strategy informing the company’s programme of investments and divestures.
“Increased profitability stems from a portfolio management strategy geared to the brands and products which combine higher margins with stronger growth potential,” he told shareholders.
Brabeck-Letmathe examined the group’s increasing emphasis on nutrition-related businesses. “This is a very promising area of business, which is why, in recent months, we have opted to reinforce our position through an active strategy of acquisitions,” he said.
In the last year, Nestlé has bought four nutrition-based businesses, the latest being this month’s acquisition of US baby food brand Gerber.
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By GlobalDataNestlé believes the food service sector offers growth opportunities due to strong growth in spending on food outside the home, Brabeck-Letmathe said.
The Nestlé chief also highlighted the group’s activities aimed at consumers in emerging markets earning between US$1,500 and $5,000 a year.
“We are responding to this demand with products which we refer to as Popularly Positioned Products (PPPs), which are often specially formulated to overcome certain nutritional deficiencies such as a lack of vitamin A, iodine or zinc,” he said. “To succeed in this area we will have to adapt our product formats, their composition and the raw materials we use; we will also have to reinvent the way our products are distributed to take account of local consumer lifestyles and habits.”
Brabeck-Letmathe added: “These are profitable activities: this is not charity, but a long-term business opportunity that is justified by the returns generated.”
Brabeck-Letmathe received broad backing from the group’s shareholders when he was re-elected to the board of directors for a full five-year term. All board proposals were passed with strong majorities.
Shareholders approved the annual report and the accounts and accepted the proposed dividend increase to CHF10.40 (US$8.62) per share, up 15.5% over last year.
Investors also accepted the reduction in share capital by CHF7.7m through the cancellation of a corresponding number of registered shares following completion of the buy-back programme last year.
