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Nestlé is the world's biggest food manufacturer, with almost 450 factories spread across the globe, and a portfolio that ranges from baby foods to pet care, from chocolate to mineral water, from coffee to frozen pizza. Its world-famous brands include Nescafe, Kit Kat, Maggi, Purina and Perrier, among many others. The group also controls a large shareholding in cosmetics company L'Oreal and has its own growing medical skincare division. However, aside from those sidelines, recent years have seen a greater concentration on a focused food and beverage business. In particular Nestlé has leveraged its performance in sectors such as ice cream and petfoods with an aggressive acquisition strategy, and divested businesses where it has failed to gain a leading position. At the same time, it has placed health and wellness at the forefront of its agenda, developing the widest possible range of nutritionally balanced products under the overall umbrella "Good Food, Good Life". Yet despite that focus, overall growth has slowed dramatically since 2012 to its lowest level in years as a result of fierce competition from faster-moving niche food and beverage brands. See also Nestlé USA, Nestlé UK, Nestlé Australia, Nestlé Latin America and Nestlé Japan.
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Adbrands Daily Update 19th Dec 2019: Hot on the heels of the transfer of its US ice cream business to Froneri, Nestlé also found a solution for chilled foods business Herta, which has been under review for most of this year. It will transfer management control and a 60% equity stake to Spanish food group Casa Tarradellas. The deal includes Herta cold cuts and meat-based products in six European countries, as well as the Herta dough business in France and Belgium. Nestle will retain full control over the Herta-branded vegetarian range. The business being acquired by Tarradellas was valued at €690m. The buyer is the market leader in Spain for pizza, fresh dough and charcuterie.
Adbrands Daily Update 12th Dec 2019: Nestlé effectively called it quits on global ice cream, transferring its biggest remaining operating subsidiary in that segment, in the US, to joint venture partner Froneri. The latter, co-owned by Nestlé with private equity investor partner PAI, already manages the food giant's ice cream business in Europe, as well as in selected other markets. Earlier this year, for example, it added Nestlé ice cream in Israel to its collection. Transaction value for the US sale was stated as $4bn, a little over twice the division's 2018 revenues. Brands include Haagen-Dazs (which Nestlé owns in the US only) and Dreyer's/Edy's, as well as Skinny Cow , Drumstick and other global ice cream products. Nestlé has a 50% stake in the enlarged Froneri, and keeps outright control of its ice cream operations Canada, Latin America and Asia, for the time being at least. However, a transfer of those subsidiaries also to Froneri may only be a matter of time.
Adbrands Daily Update 2nd October 2019: Nestlé completed the sale of its Skin Health division - which returns to its previous name of Galderma - to a consortium of private equity investors led by Sweden's EQT and the investment authority of Abu Dhabi. The final sale price was CHF 10.2bn, or around $10bn. Combined revenues of the business were CHF 2.8bn last year. Former Shire Pharmaceutical leader Flemming Ornskov takes over from Suart Raetzman as CEO.
Adbrands Daily Update 16th May 2019: Nestlé said it has opened exclusive negotiations to sell its Skin Health division to a consortium of private equity investors led by Sweden's EQT and the investment authority of Abu Dhabi. The price tag is likely to be around $10bn. The Skin Health unit is best known for its Galderma dermatological business as well as a collection of cosmetic beauty fillers and other products including Restylane and Sculptra. It also has a controlling stake in the Proactiv joint venture with Guthy-Renker. Nestlé said last year it was considering strategic alternatives for the business.
Adbrands Weekly Update 8th Nov 2018: Tina Beuchler, Nestlé's head of media in Germany, is moving to the food giant's Vevey HQ as global head of media & agency operations. She takes over from long-time global chief Nigel Conway. In Germany, Beuchler is succeeded by corporate communications director Jolanda Schwirtz, who adds oversight for media and digital communications.
Nestlé has maintained a strong position in the global food market, strengthening its hand in several key segments including ice cream, beverages, frozen meals, pet care and culinary products through acquisitions, or well-chosen partnerships. No rival comes close to matching its broadly diversified portfolio, and its name is almost certainly the world's best-known food and beverage brand, and probably the most trusted.
Nestlé has five operating divisions. The food businesses operate as three geographic divisions in the Americas, Europe and Asia Pacific regions, while the company's water and healthcare businesses operate as separate global units. The group's products fall into six categories. However across these, there are six main brands which between them generate more than 70% of group revenues. The biggest of all is the main Nestlé brand, used for dairy products, mineral water, confectionery and prepared foods. It alone generates sales of around SFr 45bn a year (or almost €30bn), equivalent to 40% of combined revenues. It is supported by Nescafe, Nestea, Maggi, Buitoni and Purina, which between them contributed a further SFr 30bn or so in revenues.
Beverages are Nestlé's biggest business, and also its most profitable, contributing almost a third of operating profit. Powdered and liquid beverages excluding water generated combined revenues in 2018 of SFr 21.6bn (€18.7bn); while Nestlé Waters (Perrier, Vittel etc - see separate profile) reported additional sales of SFr 7.9bn (€6.8bn), of which SFr 7.4bn (€6.4bn) was actually water (as opposed to other soft drinks). The group was a pioneer in the creation of soluble or powdered drinks, using a process it first developed for milk. That portfolio is now dominated by Nescafe, by far the biggest soluble coffee brand worldwide. Combined sales from coffee alone, and coffee making systems, all included in the powdered and liquid beverages total, were SFr 9.07bn (€8.3bn) in 2016. Nestle is the global leader in coffee with around 23% share in 2015, according to Euromonitor. (JAB, owner of Jacob Douwe Egberts and Keurig, ranks #2 with around 15%).
In addition Nestlé is the world leader in non-coffee soluble beverages with chocolate drinks Nesquik and Nescau, and Milo chocolate malt. Nestea and other ready-to-drink chilled teas are produced by Beverage Partners Worldwide, a joint venture with Coca-Cola in Europe and Canada. Until 2014, the group also owned shelf-stable fruit juice business Juicy Juice, but this was sold off in 2014 to private equity and is now part of Harvest Hill Beverage Company.
Linked to its coffee business is the fast-growing coffee vending system Nespresso, sales of which are now around SFr 4bn. The group launched a new premium tea dispensing system, Special.T, in September 2010, but so far sales are restricted to the launch markets of France and Switzerland. The group also markets more robust coffeemaking systems for professional or office use. Jacobs Douwe Egberts and its linked company Keurig are its main rivals in consumer coffee systems; Mars has a small presence in office systems.
Sitting behind Beverages is the Milk Products & Ice Cream division, with combined revenues of SFr 13.2bn (€11.4bn) in 2018. Traditionally the core of this business is provided by shelf-stable dried powder products ranging from infant products (Nido, Nespray and others) to Coffee-Mate, or milk-based cooking products such as Carnation and La Lechera. More recently the group has introduced chilled dairy products under its shelf-stable brand names, as well as ready-to-drink flavoured milks, La Laitiere, Yoco and LC1 yogurts, fermented drink Chamyto, and low-fat concentrated milk Gloria. Nestlé enjoyed some success with the roll-out of Sveltesse as the umbrella for a wide range of wellness-oriented chilled low-fat dairy products and other other healthy dessert items.
However, in general the chilled dairy sector has been one in which Nestlé has delivered an uncharacteristically weak performance compared to rivals. In the UK, Nestlé acquired a portfolio of local yogurts in 2002 including Ski and Munch Bunch, but these still rank far behind behind Muller and Danone. In 2003, the company formed an alliance in Germany and Austria with Muller, licensing that company rights to its LC1 brand. However Nestlé's chilled dairy range has struggled to overtake the considerable overall lead already enjoyed in this sector by Danone. In 2006, the group merged all its chilled dairy operations in the UK and mainland Europe into a joint venture controlled by Lactalis of France. Nestlé's chilled dairy products are marketed in Brazil, Argentina and several other Latin American markets since 2003 by Dairy Partners Americas, a joint venture with New Zealand's Fonterra dairy cooperative.
Milk products also includes a large portfolio of breakfast cereals, which are marketed outside the US by Cereal Partners, a joint venture with General Mills. Combined sales of milk products excluding ice cream totalled SFr 10.54bn (€9.7bn) in 2016. [Continued on next page...]
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