Nestlé sat on $28.3 billion (R192.6bn) in cash this year while competitors shelled out billions for acquisitions, investing instead on building a personalised nutrition business and making smaller purchases.
Nestlé aims to become the leader in health science nutrition in 10 years, extending its dominance beyond coffee, powdered milk and baby food.
The Swiss chocolate maker says Nestlé Health Science’s products will help treat or prevent conditions such as high blood pressure and obesity.
Nestlé shunned the three biggest food deals of the year, even after amassing a cash pile from the sale of its stake in Alcon. Kraft Foods purchased Cadbury in a $21bn deal; PepsiCo agreed to pay more than $3.8bn for Wimm-Bill-Dann Dairy & Juice in Russia; and KKR led a $4bn buyout of Del Monte Foods.
“They choose not to play,” said Thomas Russo, a partner at Gardner Russo & Gardner. “We have long been rewarded by Nestlé’s willingness to step away from the moves made popular by the crowd.”
The company would not say how much it was investing in the health unit, which opens on January 1 to develop gels, shakes and soluble powders.
Luis Cantarell, the head of the business, said he would spend five years developing a products to prevent or treat Alzheimer’s, obesity, diabetes and high blood pressure.
“There is a race to the middle between pharma and food,” Cantarell said in October. “The opportunity is big. The risk is big, and the reward is big.”
Nestlé’s capitalisation has swelled by more than Sf70bn (R495bn) since 2004, making it Europe’s second-most valuable company. It has returned Sf60bn of cash to shareholders.
The total return on Nestlé shares since the end of 2004 is 120 percent, compared with 9.4 percent for Kraft and 46 percent for PepsiCo.
In the past year, Nestlé shares have risen 11 percent, the same as PepsiCo. Kraft has gained 18 percent.
The Swiss firm has not shunned all acquisitions, buying Kraft’s North American pizza business for $3.7bn. It has made about 10 bolt-on acquisitions this year. – Bloomberg