Nestle Shares Advance as New Outsider CEO Presages Shakeup

Updated on
  • First time in almost a century Nestle doesn’t pick insider
  • Shares gain 2.7% as investors welcome Schneider’s appointment

Nestle SA rose the most in more than four months as investors welcomed the surprise appointment of Fresenius SE’s Ulf Mark Schneider as successor to Chief Executive Officer Paul Bulcke.

The stock gained 2.7 percent to 73.05 Swiss francs at 10:16 a.m. in Zurich as analysts said the health-care executive’s arrival may portend a strategic revamp at Europe’s biggest company by market value.

“Nestle is in need of fresh legs,” wrote Martin Deboo, an analyst at Jefferies. “Schneider’s track record is exceptional.”

Schneider, 50, has been CEO of health-care provider Fresenius since 2003. The dual U.S.-German citizen is the first outsider to be given the Nestle CEO job in almost a century. During his 13 years at Fresenius, he delivered an average return of 23 percent a year, including dividends. By contrast, Nestle has forecast sales will miss its long-term target for a fourth year.

Ulf Schneider.
Ulf Schneider.
Photographer: Ralph Orlowski/Bloomberg

The appointment of Schneider, whose background is in the medical industry, supports Nestle’s goal to redefine itself as a scientifically-driven nutrition and health company. Over the past five years, as packaged-food makers have been pilloried for contributing to a growing obesity crisis, Nestle has invested heavily in its health-science unit, which seeks to commercialize discoveries made by its research arm in areas like metabolic health and Alzheimer’s disease.

For a Businessweek story on Nestle’s push into health care, click here

Fresenius made more than a dozen acquisitions under Schneider, and it’s the leading bidder to acquire Pfizer Inc.’s pumps and devices business, people with knowledge of the matter said earlier this month. That experience may help Bulcke’s successor consummate a revamp of Nestle’s portfolio. Nestle has been reducing its exposure to mature businesses such as European ice cream while it adds new assets such as Dysport, a wrinkle treatment that competes with Botox. Bulcke, 61, has been under pressure to find new areas of growth as he concludes a tenure that started in 2008.

Schneider will join on Sept. 1 and start as CEO on Jan. 1. He will work alongside recently appointed Chief Financial Officer Francois-Xavier Roger, whose background also is in health care.

‘New Era’

“Schneider will trigger a new era at Nestle,” wrote Jean-Philippe Bertschy, an analyst at Bank Vontobel, in a note. That may include streamlining the product portfolio, especially at the company’s U.S. frozen food and chocolate businesses, plus more acquisitions of nutrition and health-related companies.

In tapping Schneider, Nestle spurned three internal candidates: Chris Johnson, who runs the company’s cost-efficiency program; Laurent Freixe, who heads the Americas business; and Wan Ling Martello, the former finance chief who took over Nestle’s struggling Asia, Oceania and Africa region last year. Nestle last chose an outsider as CEO in 1922, following its first and only annual loss, and has since preferred to spend years grooming management for the top job.

“We suspect the move may leave some ruffled feathers,” wrote Robert Waldschmidt, an analyst at Liberum. He said he expects more members of senior management may change.

Recent Setbacks

Recent setbacks include Nestle’s biggest recall ever after Indian regulators said they found Maggi noodles with unsafe levels of lead in them. While the company has reintroduced the products, Asian sales remain lackluster. Meanwhile, its Nespresso coffee business faces a slowdown, Europe is battling deflation, and a revamp of its ailing frozen-food business in the U.S. is still a work in progress.

“Perhaps desperate times call for desperate measures?” wrote Alan Erskine, an analyst at Credit Suisse.

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