Nestlé’s board of directors believes that there is a lot of growth potential for the company’s food product lines, but it looks like they might not want to hold on to their extensive line of skincare products for this very reason. After assessing Nestlé’s Nutrition, Health and Wellness strategy, the board decided to sharpen the company’s focus on their food, beverage and nutritional health products while exploring “strategic options” for the company’s skin health lines.
This enhanced focus on Nestlé’s food and beverage lines includes deepening the company’s resource commitment to growing this segment. This means that Nestlé’s skin health lines will have to grow “outside the group’s strategic scope.” A full review is expected to be completed by mid-2019.
“Our board has fully reconfirmed the value potential of Nestlé’s Nutrition, Health and Wellness strategy. Sharpening our strategic focus on Nestlé’s core food, beverage and nutritional health products offers the best opportunity for long-term profitable growth and is fully in line with the pursuit of our company’s purpose. As a consequence, our board is convinced that exploring strategic options for Nestlé Skin Health is in the best long-term interest of this business and Nestlé shareholders,” said Paul Bulcke, chairman of Nestlé’s Board of Directors, in a release.
Nestlé’s skin health segment spans three major skincare business units: prescription, aesthetics and consumer care. Such products include Epiduo, Soolantra, Restylane, Azzalure, Cetaphil and Proactive. The company’s skin health unit, headquartered in Switzerland, has over 5,000 employees across 40 countries. In 2017, the Nestlé Skin Health segment had sales around $2.82 billion.
“Nestlé Skin Health has made significant progress under its new leadership team over the past two years. The company has developed convincing growth strategies for each of its business units and regained a competitive cost structure. Now is the right time to explore the best ownership structure for Nestlé Skin Health and to consider ways of taking it to the next level,” said Mark Schneider, CEO of Nestlé, in a release.
Although the company’s skincare product profits seem to be quite large, Nestlé has their eye on the prize because their food and beverage sales in 2017 significantly outweigh their skincare product sales. According to Statista, Nestlé’s food and beverage (excluding pet care) sales in 2017 were valued at over $80 billion. So, it makes sense that the company wants to focus on one of their most successful product segments.
This decision comes after Nestlé made strategic moves to further establish themselves in the food industry. The company has been investing in new health science initiatives to grow their nutritional health product portfolio. In fact, the board of directors reaffirmed the importance of the company’s Health Science division in their release.
After bolstering their nutritional healthcare portfolio in December with their acquisition of Atrium Innovations, a producer of science-based nutritional products, the company showed an interest in personalized nutrition. Earlier this month, the company announced the launch of a personalized nutrition program in Japan that involves using DNA testing, artificial intelligence (AI) and Instagram to create personalized nutrition beverages for consumers.
Nestlé is also keeping their eye out for new food trends to capitalize on. Just a few weeks ago, the company made headlines for their interest in incorporating goldenberries in some of their product formulations because they believe that the small yellow-orange fruit has the potential to become the next big superfood trend.
Another trend that the company has invested in is the ketogenic diet, which is a high-fat low-carb diet. In January, the company started working on a line of coffee creamers that incorporate grass-fed butter and MCT oil. This combination of ingredients has been gaining popularity in the market as celebrities, like Ed Sheeran, continue to promote the “bullet-proof coffee,” which is one of the staples of the ketogenic diet.
Considering the fact that consumers are starting to prefer healthier food options, the company scaled back their US confectionary business by selling the division off to Ferrero in January. However, Nestlé took a different approach towards their European confectionary business by developing a type of sugar-reduction technology that can reduce up to 40 percent of the sugar in their chocolate products. Nevertheless, the company is taking steps towards getting recognized for food products other than just chocolate.
So, it seems that Nestlé is looking at every avenue to gain more traction in the food industry. Considering their profits last year, Nestlé is definitely on the right track.