Nestle Downplays Risk of Brexit to World’s Largest Food Company

  • EU referendum isn’t among Swiss company’s top 10 risks: CEO
  • KitKat maker has ‘natural hedge’ in U.K. via local production

Nestle SA Chief Executive Officer Paul Bulcke said he expects the U.K. will choose to stay within the European Union, though an exit wouldn’t be a huge risk to the world’s largest food company.

Brexit probably isn’t among the top 10 risks for Nestle, Bulcke said Wednesday at a presentation to investors at its headquarters in Vevey, Switzerland.

‘‘I am quite confident wisdom will prevail,’’ he said. Nestle has something of a ‘‘natural hedge’’ in that market anyway, as most of what it sells in the U.K. is also produced there, he said. Nestle’s U.K. brands include Aero chocolate bars, Nescafe coffee and Herta hot dogs.

Companies serving consumers like foodmakers and retailers have been cautious to tread into the Brexit debate, for fear of alienating customers. Tesco Plc, the U.K.’s biggest grocer, has said the referendum is a decision for the people of Britain. Should the June 23 referendum lead the U.K. to pull out of the EU, the implementation of trade barriers may raise costs for food retailers. One group that’s rallied to keep Britain in the EU is Scotch whisky distillers, who argue that Brexit would jeopardize hard-won market access.

Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, has publicly supported the campaign to keep the U.K. in the EU.

Cost Discipline

Separately, Nestle Chief Financial Officer Francois-Xavier Roger said mergers and acquisitions are exciting and can add to the company’s business, though the challenge is picking the right ones as deals need to meet sound financial criteria. The executive, who joined Nestle almost a year ago, said his top priority is cost discipline, followed by free cash flow.

Nestle this year bought out other shareholders in Osem Investments Ltd., Israel’s largest publicly traded foodmaker, for about $840 million, its biggest food acquisition since 2012. In the past few years, the Swiss company had made takeovers to develop a skincare unit and sold underperforming businesses such as the Jenny Craig weight-loss service and PowerBar sports snacks.

Roger said buying full control of other publicly traded units worldwide or its joint venture partners in China wouldn’t necessarily drive synergies.

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