Case Facts:s

Intro

 Sales: $116.62bln in 2010, employees – 280K

 In ’97, strategized to become leading nutrition, health and wellness (NHW) company in
the world
 Over next 13 years, NHW strategy influenced strategic decisions regarding M&A,
product improvements, and packaging innovations

Birth of a Strategy

 CEO and Chairman John Brabeck was resistant to radical change for short-term
profits, but valued strategic broad strategic changes with the potential to produce strong
growth
 Brabeck created nutrition strategic business division due to the rising health concerns,
changing market and shifting preferences about food
 Acquisition of Powerbar deemed as the first move towards the NHW strategy

60/40+

 Adopted 60/40+ measure to improve nutrition of its products

o Removing salt, sugar, fat and replacing them with whole grains, calcium, Omega-
3s, antioxidants etc.

Building Nestle Nutrition

 In 2005, Brabeck unified divisions of healthcare nutrition, performance nutrition, infant

nutrition and weight management under control of one executive team Nestle Nutrition
o Drew larger investments in R&D and salesforce and marketing spend on NHW
Insight: Unifying divisions likely to result in better management output and
investments channeled will possibly help in establishing the desired brand
image?
o Initial investments made in Powerbar, Pria and Goodstart struggled to grow sales
and market share
 Introduced cross-company packaging innovation Nestle Nutritional Compass – a
nutrition manual for consumers Commented [U1]:
Structured visualization of health benefits influences positive
consumer behavior
  Created Corporate Wellness Unit to drive NHW across the organization
o Focus of the unit laid on delivering better-tasting and ‘better for you’ products
and solutions by accelerating the adoption of 60/40+ and the Nutritional
Compass
o Coordinated Nestle’s network of Wellness Champions located strategically
around the globe to aid the quick implementation of NHW tools at local and
regional levels

Acquisitions
Uncle Toby Acquired in May 2006 ($670mln); excluded salty
and savory snacks from acquisition

Jenny Craig $600mln deal, and entered $30bln weight-loss

management industry (already owned Lean
Cuisine in the same industry)

Medical Nutrition arm of Novartis $2.5bln meal, raised market share of medical
nutrition market from 7%-25% (Dec ’06)

Leverage Novartis’ pharma background and

relationship with industry thought leaders to
fortify position in healthcare nutrition

Geber Baby Foods (Novartis) $5.5bln (Apr ’07). Acquisition amounted to

$9.5bln+, assuring Nestle’s Nutrition division
account for 10% of total revenue

Likely to strengthen Nestle’s infant nutrition

presence in US and holding in canned foods

Laudable acquisition as nutritional food sales for

Nestle increasing 8% y/y (compared with 1%-2%
of other products)

Insight: Acquisition of Jenny Craig could have projected Nestle’s position as an organization
promoting healthy lifestyle, not just healthy eating?

 Withdrew potential merger with Pepsi in order to avoid digressing from the NHW focus
 2007: CFO Polman identified $70bln opportunity in delivering affordable nutrition to
developing markets and $75bln opportunity in NHW for Nestle Foods and Beverages
o Committed investments worth $1.5bln over next 10 years to startup and growth-
phase companies in NHW
 Sales in 2007 grew to $11bln
  Established industry’s largest R&D network and largest publisher of nutritional
information for scientists
 Nutritional compass featured over 90% of packaging, and an average 20% of products for
sale were tested and improved annually through 60/40+

R&D

 Employees: 5000 and invested an average of $2bln annually

 Highlights: partnership with 1500 universities and more than 100,000 scientists across
suppliers and governments to develop new nutrition technology across suppliers and
government to develop new nutrition technology
o Semblance with pharma R&D

Bulcke Takes the Reins

 Bulcke’s strategy: shift Nestle from a ‘commoditized, raw-materials-based food and

beverages company to an added-value, science-inspired nutrition, health and wellness
company’

Dealing with Contradictions

 Acquired Kraft’s frozen pizza business, including DiGorno, Tombstone, and California
Pizza Kitchen brands for $3.7bln
 Bulcke reiterated NHW’s mission was to deliver pleasurable food that was healthier
Insight: Channeled efforts towards making indulgent food with less fats and calories,
thereby carving a niche market for themselves

Looking Ahead

 Where we are: spot between food and pharma industry