Nestle Needs to Accelerate Portfolio Adjustments, Brabeck Says

Nestle SA needs to pick up the pace of its portfolio adjustments as the maker of Nespresso coffee faces tougher competition from The Kraft Heinz Co. and Jacobs Douwe Egberts, Chairman Peter Brabeck-Letmathe said.

The Vevey, Switzerland-based company is evaluating its businesses around the globe to improve its position in the health and well-being category, Brabeck-Letmathe said Thursday in a speech at the company’s annual general meeting in Lausanne.

Nestle has been revamping its portfolio to revive sales growth, selling brands like Juicy Juice fruit drinks and building out the skin-health business it created last year. It’s also sold PowerBar snacks and most of its Jenny Craig diet centers, and is in talks to offload its European frozen food business Davigel to Bain Capital LLC’s Brakes Group.

As Nestle trims away at its roster of food and beverage brands, its competitors are getting bigger. Kraft Foods Group Inc.’s merger with H.J. Heinz Co., a deal orchestrated by 3G Capital and Warren Buffett’s Berkshire Hathaway Inc., will create North America’s third-biggest food and beverage business. Mondelez International Inc. has agreed to combine its coffee unit with D.E Master Blenders 1753 to create the world’s second-biggest coffee maker.

Buffett and 3G, the private-equity firm founded by Brazilian billionaire Jorge Paulo Lemann, have “pulverized the food industry market, particularly in America, with serial acquisitions,” Brabeck said. 3G’s emphasis on “ruthless cost-cutting” to widen profit margins has had a “revolutionary impact” on other food companies, he said.

While the company’s North American frozen-food business weighed on sales growth in the region last year, it’s continuing efforts to reposition its Lean Cuisine, Hot Pockets and Stouffer’s meals to reach more health-conscious shoppers. Brabeck on Thursday said Nestle has “found the solution” for the frozen-food unit, without providing details.

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