Nestlé, Unilever Bite-Sized Deals Betray Healthier Appetite
September 07 2017 - 10:05AM
Dow Jones News
By Saabira Chaudhuri
LONDON--Two of the world's biggest packaged-food giants, Nestlé
SA and Unilever PLC, disclosed separate, small deals to buy the
sort of homegrown, natural brands that have been eating the
industry's lunch.
Switzerland-based Nestlé said Thursday it agreed to buy
California-based Sweet Earth Foods, the maker of plant-based meat
substitutes like "Benevolent Bacon" and "Harmless Ham." Anglo-Dutch
rival Unilever said it was buying Pukka Herbs Ltd., a British-based
organic herbal tea maker.
Though both deals are small and terms weren't disclosed, they
represent the latest in a series of steps Nestlé, Unilever and
other big companies in the sector are making to catch up with
fast-changing consumer tastes.
The global packaged-food industry is facing fierce competition
from a burgeoning number of small, but high-growth food and
beverage brands. These brands have struck a chord with consumers
looking for locally produced or more healthy, natural choices.
Amid this shift, sales from traditional players have flagged,
spurring consolidation, cost cutting and restructuring.
Unilever fended off an unsolicited takeover by Kraft Heinz Co.
earlier this year. Activist investor Dan Loeb's Third Point hedge
fund in June disclosed a major stake in Nestlé, calling for changes
in strategy to improve shareholder returns. In response, the two
consumer-goods firms have focused on cost cutting and promises to
boost dividends, while going on the hunt for nimbler food and
beverage brands with the potential to accelerate growth.
Nestlé's deal to buy Sweet Earth comes less than three months
after it bought a stake in subscription-meals company Freshly,
which sells healthy, prepared meals to consumers across the
U.S.
Moss Landing, Calif.-based Sweet Earth bills itself as a
natural, ethical, environmentally conscious company that
substitutes plant proteins for animal ones in meals like curries,
stir fries, breakfast wraps, burgers and pasta. Founded in 2011,
Sweet Earth is available in more than 10,000 stores in the U.S. It
is stocked at independent natural grocers, as well as bigger chains
like Amazon.com Inc.'s Whole Foods, Target Corp., Kroger Co. and
Wal-Mart Stores Inc.
"We're experiencing a consumer shift toward plant-based
proteins," said Paul Grimwood, chief executive of Nestlé's U.S.
arm. Plant-based food, as a sector, is growing at double-digit
percentages rates, Nestlé said.
Nestlé didn't disclose the brand's current sales, but said it
expects the sector to reach $5.3 billion in sales by 2020. Nestlé's
annual sales last year came in at about $94 billion.
Unilever, meanwhile, said Thursday it bought Pukka, which
generated GBP30 million ($39 million) in sales in its last fiscal
year. Despite the small revenue base, Pukka grew about 30% a year
over the past three years, Unilever said. Unilever posted sales of
$63 billion last year.
Unilever--the world's biggest tea maker with brands like Lipton,
PG Tips and Brooke Bond--has been working to shift its portfolio
toward higher-growth tea types like green and herbal tea and away
from black tea, sales of which are slowing. The latter segment
makes up about 80% of its tea sales by value.
The company in 2013 bought premium Australian tea business T2.
It has since opened T2-branded stores around the world. Last year,
it launched matcha teas--a type of green tea--under its mass-market
Lipton tea brand.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
September 07, 2017 09:50 ET (13:50 GMT)
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