Dive Brief:
- A group of more than two dozen institutional investors urged Nestlé to set a target to increase the portion of sales that come from better-for-you products.
- In a two-page letter to the world’s largest food company, the shareholders said the market is currently oversaturated with foods that cause harm to public health and that create “systemic risks to investor returns.” “We have already made clear our willingness to escalate our engagement, should [Nestlé] fail to provide assurance that it intends to reduce reliance on the sale of less healthy products,” the groups said.
- Food makers have come under pressure to improve the nutritional content of their portfolios as consumers look to eat healthier, a trend that has grown in recent years, especially since COVID-19.
Dive Insight:
Even as Nestlé has become more transparent about the healthiness of its food, investors are pushing for the company to do more.
Last month, Nestlé said 37% of its net sales, excluding pet care and specialized nutrition, come from products that are considered “healthy.” The Switzerland-based maker of Lean Cusine, Sweet Earth and Tombstone pizza, estimated that 43% of its net sales came from food and beverages that should be consumed occasionally or that should have their nutritional value improved.
In 2022, Nestlé committed to “increase the transparency of the nutritional value of our global portfolio” by benchmarking its offerings against the Health Star Rating (HSR) system, which assesses food based on attributes such as saturated fat, sodium, sugar, protein and vegetables.
Despite improvements the company has made to brands such as Carnation Breakfast Essentials and Natural Bliss, Nestlé has warned there could be challenges in improving the health content of some of its offerings, particularly those that are indulgent.
“It’s clear that while the work goes on, there are limits. So enjoyment-related categories will not be turned into health-related categories,” Mark Schneider, Nestlé’s CEO, told analysts during its earnings call in February.
The investors appeared unconvinced in the letter they sent to Nestlé.
“We urge the company to grasp the opportunity to stay ahead of food-related regulation and evolving consumer expectations,” the letter noted. “We look forward to working constructively with Nestlé’s board to help the company realise its ambition and set ambitious targets to increase the proportion of its sales from healthier products.”
The investors added that data published by the World Obesity Federation showed more than half of the world’s population will be overweight or obese by 2035 unless action is taken. Obesity, they noted, hurts economies by reducing the health of workforces and increasing healthcare costs. In the U.S. alone, the WFO said 58% of adults will be obese by 2035.
