Unlock the Editor’s Digest for free

Nestlé’s new chief executive is reviewing the vitamins business his predecessor acquired four years ago, as he seeks to boost growth by refocusing the food group on its core pet, coffee and nutrition divisions.

The Swiss conglomerate said in a trading update on Thursday that it had launched a strategic review of its mainstream vitamins, minerals and supplements brands, including Nature’s Bounty and Puritan’s Pride, which the group bought in 2021 as part of an acquisition spree by former boss Mark Schneider.  

The strategic review is Laurent Freixe’s latest effort to turn around Nestlé’s sluggish performance since taking over as chief executive last year. Freixe, a company veteran, has since overseen the separation of the company’s European water business and launched a $2.8bn cost-cutting drive.

The company said the review could result in a sale of the brands, adding that its vitamins business would now focus on global, higher-end products, such as Garden of Life and Solgar.

It comes after Freixe told the Financial Times earlier this year that Schneider’s forays into new product categories including health supplements had “weakened the fabric of the organisation” and resulted in Nestlé neglecting its core business lines.

Like many consumer goods companies, Nestlé’s performance has been dragged down by weak consumer demand and the spiralling cost of some raw materials. The group has raised prices in a bid to offset falling sales volumes as shoppers around the world spend more cautiously.

In its half-year trading update on Thursday, the company reported a 3 per cent rise in organic sales in the first half of the year. However, real internal growth — the company’s measure for sales volume growth — sank 0.4 per cent as consumers pushed back against higher prices.

Its underlying operating margin stood at 16.5 per cent, ahead of an expected 15.9 per cent, which analysts said was likely due to higher rises.

The company’s shares fell 5 per cent on Thursday morning on the back of the volume declines. Reckitt Benckiser stock meanwhile soared 10 per cent, after the maker of Strepsils and Durex upgraded its outlook and said its core brands would grow by more than previously expected this year.

Recommended

Vontobel analyst Jean-Philippe Bertschy welcomed the brand review but said it “should have been started earlier”. “Nestlé has probably hoped for a faster turnaround in those underperformers which became a lag,” he said, adding that the brands could be valued at a few hundred million at a multiple of 10 to 12 times.

Nestlé acquired the brands with its acquisition of Bountiful Co for $5.75bn in 2021, but the food giant struggled to integrate the brands into its supply chains.

Freixe suggested to the FT in May that he would be open to selling brands in unattractive categories where Nestlé was not “in a position to win”.

Analysts and investors have said Nestlé could also consider a sale of its frozen food and prepared meals business in the US, which has struggled to hold on to consumers during the cost of living crisis.