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By Saabira Chaudhuri 

Nestlé SA's chairman is facing mounting opposition from some shareholders who say the former chief executive isn't helping his successor's efforts to reinvigorate growth at the world's largest packaged-foods maker.

The maker of Nescafe coffee and Purina pet food has been under pressure since activist investor Daniel Loeb's Third Point LLC disclosed a $3.5 billion stake in the company last year and called for a raft of changes.

Billionaire Mr. Loeb, who is working to rally support from other shareholders, has asked Nestlé to sell its 23% stake in beauty company L'Oréal SA. He has also criticized Chairman Paul Bulcke--appointed in 2017 after eight years as CEO--for being "too comfortable with the status quo."

Nestlé has in turn sought to boost returns by investing in higher-growth categories like coffee, while selling underperforming units such as U.S. confectionery.

However, a survey of investors by Exane BNP Paribas, a research firm, indicates dissatisfaction extends beyond Third Point, suggesting the hedge fund could find support if it pushed Nestlé further.

Exane analyst Jeff Stent said the survey was independently conducted and wasn't commissioned by Nestlé, Third Point or anyone else.

Of respondents, 65% said they would vote against the re-election of Mr. Bulcke if Third Point campaigned against him, 80% said they thought Nestlé should be more active on disposals and 70% said it should sell its L'Oréal stake.

The survey, conducted over the past month, had 61 respondents, 67% of whom said they were current Nestlé shareholders. Full results, reviewed by The Wall Street Journal, were only shared with those who took the survey.

Respondents only represent a fraction of Nestlé's investors and 95% of shareholders voted in favor of Mr. Bulcke at the last vote.

Nestlé declined to comment.

A Third Point spokeswoman said the firm has "no present plans to oppose Mr. Bulcke."

Third Point would like its adviser on the Nestlé stake, Jan Bennink, to be added to the board, according to people familiar with the matter. The firm, which has criticized Nestlé as insular, declined to comment on whether it would nominate him.

Mr. Bennink, a former Royal Numico NV and Sara Lee Corp. executive has a reputation as a turnaround specialist. As CEO of Numico he cut costs, sold assets and boosted sales before the baby-food company was sold to Danone. As executive chairman of Sara Lee he oversaw its split into two companies.

Growth slowed sharply during Mr. Bulcke's tenure as CEO, which some former executives attribute to strategic missteps, as well as tough economic conditions.

He took the helm in 2008 as the financial crisis unfolded, but also presided over a series of deals that have dragged on growth, including the 2010 purchase of Kraft Heinz Co.'s frozen-pizza operations in North America and two Chinese deals in 2011.

Nestlé has said it didn't act fast enough when consumers began opting for fresh food over frozen meals, hitting brands like Lean Cuisine and Stouffer's.

"Bulcke is associated with a failed strategy," said Dan O'Keefe, who as head of the global-value team at Artisan Partners oversees a $300 million position in Nestlé. "You send a certain tone when the architect of that strategy sits at the top of the organization. By putting someone else in that role you send a strong signal externally and internally that you aren't wedded to the past."

In the Exane survey, 41 of the 61 respondents said they would like to see Nestlé sell its U.S. frozen-foods business, 32 respondents said they would like to see U.S. ice cream sold off and 28 said they would like to see European confectionery sold.

"We have some concerns that the strategy he proposed in the past causes maybe some turbulence at the present time," said Ingo Speich, a portfolio manager at Union Investment Group, speaking of Mr. Bulcke. The Frankfurt-based firm owns more than EUR720 million ($826 million) in Nestlé shares.

Mr. Speich said new Nestlé CEO Mark Schneider was the right person to lead the company and that he "should not be constrained by a person who had a significantly different strategy."

Mr. Schneider last year scrapped Nestlé's long-held target of boosting organic sales by 5% to 6% each year after the company failed to achieve the goal for the fourth straight year.

Nestlé has said it would reach mid-single-digit organic growth by 2020, but just 37% of investors in the Exane survey think this will happen.

Artisan's Mr. O'Keefe said he would like to see Mr. Bennink become Nestlé's chairman, while Union's Mr. Speich said he would support him being added to the board, despite the addition of three new members by Nestlé this year.

In Exane's survey, 75% of respondents said they would vote for Mr. Bennink if Third Point nominated him for the board.

"The board seems to be a closed system; it's very stable," said Mr. Speich. "Nestlé has to move faster, not just operationally but with changing the board structure."

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

October 23, 2018 07:51 ET (11:51 GMT)

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