Nestlé’s weak forecasts add impetus to overhaul campaign

Nestle in Halifax
Nestle in Halifax

Nestlé forecast modest organic sales growth this year and reported its weakest gain on record in 2017, giving fresh fuel to investor Daniel Loeb’s campaign to overhaul strategy at the world’s biggest food group.

Nestlé employs 1,800 people in York , where it makes up to seven million KitKat bars a day , and 500 in Halifax, where it makes Quality Street and After Eight chocolates.

Shares in the maker of KitKat chocolate bars and Nescafé coffee hit a 10-month low after it said organic growth, which excludes acquisitions and currency moves, was only 2.4 per cent in 2017.

Nestlé and its rivals have been buying and selling brands to improve performance as sales slow due to a shift in consumer tastes towards healthier foods and independent labels.

Mr Loeb’s hedge fund Third Point took a $3.5bn Nestlé stake last summer and has been pushing to speed up its transformation into a higher growth, more efficient health food company.

“Work on costs usually kicks in faster than work on growth,” chief executive Mark Schneider said at Nestlé’s headquarters in Vevey, Switzerland on Lake Geneva, in part due to the lag between buying a new brand and it contributing to performance.

Nestlé also said it had decided not to renew a shareholder agreement with L‘Oreal beyond March 21 to maintain “all available options”, but had no intention to increase its 23 per cent stake and remained committed to the cosmetics company.

That is likely to fuel speculation about Nestlé selling its stake, according to a London-based trader.

L‘Oreal’s CEO last week said the company was ready to buy back the stake, should Nestle decide to sell.