Consumer

Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

The Ulf-man cometh. And it's all rather underwhelming.

Ulf Mark Schneider, the new chief executive of Nestle SA, has laid out what is ultimately a more sensible course for the world's largest food company. As expected, he's ditched the strict adherence to an organic sales-growth target of 5 to 6 percent. This year, it'll be more like 2 to 4 percent.

Schneider is also aiming for mid-single-digit growth by 2020, which gives him more wiggle room in the intervening period.

In the job for coming up to two months, Schneider is wise to have moved away from rigid targets -- Nestle's missed them for the past four years anyway.

Out With the Old
Nestle has missed its 5 to 6 percent organic growth target for four years anyway
Source: Bloomberg Intelligence

And with food prices still falling in many developed markets, consumer tastes changing and emerging regions running out of steam, Schneider has freed himself from what had become an out-of-date straight jacket. He's also promised significant cost savings by 2020 to bolster margins.

There's nothing to dislike here, but it's not so different from competitors who are also slashing costs.

Schneider, addressing reporters at Nestle's headquarters in Vevey, Switzerland on Thursday, stopped short of making any firm statements on asset divestments, or the company's balance sheet. Even the disposal of Nestle's stake in L'Oreal SA seems to be off the table for now.

Instead, Schneider wants to occupy a middle ground between companies that aggressively control costs at the expense of the top line, and those that prioritize sales growth above all else. Sometimes, though, the middle of the sandwich can be an uncomfortable place, squeezed on all sides by nimbler rivals.

As Gadfly has argued, Schneider was never going to wave a magic wand and solve all of Nestle's problems overnight.

He plans to update investors again in September, and could announce bolder moves then, like the disposal of the firm's confectionery or frozen food arms, which according to Jefferies could fetch 20 billion Swiss francs ($20 billion) and as much as 15 billion Swiss francs respectively.

But Schneider sang the praises of frozen food, and said there was no "flagrant" contradiction between chocolate and healthy eating, indicating he's keen to hang on to both.

As for M&A, expect Schneider's approach to be prudent, steering clear of assets with heady valuations and transactions that are too left field. That caution is commendable, but with deals one of Schneider's strong points, it also dashes any hopes he can quickly beef up growth areas, such as the space between food and pharmaceuticals.

Hope Springs Eternal
Investor expectations that Nestle will announce some radical change have driven the company's price-earnings ratio higher
Source: Bloomberg Intelligence

Nestle's shares slipped as much as 2.3 percent Thursday, but still trade on a forward price-earnings ratio of just under 20 -- a premium to both Unilever NV and Danone SA.

Investors may be pricing in fireworks and what Schneider's come up with is dull but worthy. Unless his plan is to underpromise and overdeliver, there's plenty of room for disappointment here.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andrea Felsted in London at afelsted@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net