Nestle's growing foothold in North America

by Editorial Staff
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NEW YORK — An in-depth review of Nestle S.A. operations in the United States highlighted a New York press conference conducted in conjunction with the release of the company’s third-quarter financial results in late October. A range of top company executives emphasized the importance of the U.S. market and how Nestle is applying its emphasis on health and wellness within the United States.

Introducing the presentations, Paul Bulcke, Nestle chief executive officer, said it was the first time Nestle had held its third-quarter press conference anywhere but in Switzerland.

Among the reasons cited by Mr. Bulcke was the sheer size of the U.S. market for Nestle — $28.3 billion in annual sales.

“Our largest individual market for Nestle (worldwide) is indeed Nestle USA,” he said.

While Nestle has had a presence in the United States for decades, the company’s profile there has changed markedly over the past 10 years, said Luis Cantarell, executive vice-president of the Americas.

In a period in which Nestle has experienced rapid sales growth in several markets around the world, the United States has grown in importance to the company overall, accounting for 26% of sales in 2010, up from 20% in 2000.

“We are today, if not the leading food company, nearly the leading food company in the U.S.,” he said. “We have more than 51,000 people working (in the United States) for this company and more than 78 factories.”

Perhaps most striking over the past decade has been Nestle’s expansion from owning only one U.S. brand with at least $1 billion in annual sales in 2000, Stouffer’s, to nine in 2010. In addition to several pet food brands, these include Lean Cuisine, DiGiorno, Coffee-mate, Gerber and Pure Life.

Mr. Cantarell described this shift as resulting from a “wise combination of organic growth and acquisitions.”

“In the last five years, we have accelerated the number of acquisitions,” Mr. Cantarell said. “You have Jenny Craig, Dreyer’s, Gerber, the health care business from Novartis, and recently, Vitality in the area of food service.”

Brad Alford, chairman and c.e.o. of Nestle USA, offered an overview of the business and discussed how Nestle’s nutrition, health and wellness initiative applies to the U.S. portfolio.

Speaking to Nestle’s tag line of Good Food, Good Life, Mr. Alford described the strategy as one well suited to the U.S. market.

“We can offer the consumer tastier and healthier choices to embrace a healthy life,” he said. “That’s what Good Food. Good Life. is all about.”

Nestle has expanded in the United States to “provide options for the consumer every day,” reaching a 96% household penetration, Mr. Alford said.

Currently, the company’s U.S. presence is strongest in three areas, Mr. Alford said — food prepared at home, beverage and indulgence and snacking. The first category is dominated by frozen products, including several mentioned by Mr. Cantarell, as well as Hot Pockets and Tombstone, plus brands such as Toll House cookie dough and Buitoni. All told the brands have sales of $6.1 billion annually.

In the beverage category, with $2.6 billion in sales, Nescafe and Coffee-mate are the largest brands, but Juicy Juice and Nesquik also fall into the category, Mr. Alford said. In indulgence and snacking, a $3.3 billion category, Nestle has leading positions in confectionery and ice cream with brands such as Dreyer’s, Edy’s, Crunch, Butterfinger, Skinny Cow and Häagen-Dazs.

“The big brands we have here, 12 of these brands, represent 70% of Nestle USA sales, and 12 of them are either No. 1 or No. 2 in their category,” Mr. Alford said.

Discussing Nestle’s latest steps to make its products more healthful, Mr. Alford referenced steps the company announced separately on Oct. 22 to make its products more healthful.

“What this is all about is taking our favorite products in the Stouffer’s line, so Mac and Cheese and Lasagna, as examples, and how do we put more nutritional value into these?” he said. “So the pasta will be whole wheat. We’ll be using olive oils in these. We are going to have reduced sodium in them.”

He noted that the company has reduced the sugar content of Nesquik powder by 25% over the last three years.

“The product has gained share every year since we’ve done that,” he said.

Beyond formulation changes, Mr. Alford identified ways Nestle through its product portfolio is working to enhance consumer lifestyles in ways that may enhance their health.

“There are data that say when consumers have family meals at home four days a week, the children have higher grades, less drug and alcohol abuse and there is less divorce in the family,” Mr. Alford said. “There are a lot of good life things that happen to people who have dinner. Our products help the family have dinner. It’s a 96-oz lasagna. You can use our product to make it easy to have a good meal in your house, which gives you a good life.”

Commenting on Skinny Cow, a more recent acquisition, Mr. Alford said Nestle has expanded both its distribution and the products line.

“This year it will be a $220 million brand for us,” he said. “And we think Skinny Cow also has application beyond just ice cream.”

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