Nestlé U.S. Chief Looks for Brands to Fix or Toss
Steve’s breakdown: As we all know, there’s been a lot of movement over at Nestle. But now it’s time to take a second look at their future plans. As far as we can see, frozen food and ice cream are the next categories to get tweaked.
And of course, any brands that get sold have a good chance to go into review.
Check it out.
BOSTON, MA: When [acLink name=”Mr. Paul Grimwood” type=”person” id=”a2Zqnq2h”] took over Nestlé’s struggling U.S. operations a year and a half ago, he faced an unlikely problem: Hair nets.
In a recent article, the Wall Street Journal (WSJ) describes how the company’s seven independent businesses in the U.S., which run a total of 87 factories, were buying hair nets and safety shoes from more than 100 suppliers. Because the units weren’t talking with each other, Nestlé couldn’t get the best bulk discounts in its biggest national market. Now Nestlé says it uses just “a handful” of suppliers.
The same thing happened with flavorings. By combining purchasing departments across businesses, Nestlé cut the number of flavor suppliers in the U.S. to four from 48.
“If you keep rolling that out across the scale and size of the whole U.S. market, it makes a phenomenal difference to the profitability,” Grimwood said in a recent interview with WSJ.
Nestlé is counting on Grimwood to fix its sagging U.S. business, which accounts for about a quarter of its more than $103 billion in sale, but has slowed to a near standstill.
Beyond supply chain issues, Grimwood must deal with a sprawl of brands in the U.S., some of which are languishing. Oh Henry and 100 Grand candy bars are long past their heyday, market share for Juicy Juice children’s fruit drinks has declined for years, and Ovaltine, the chocolate malted-milk powder that first arrived in the U.S. market around a century ago, no longer have an ad presence on television in the United States.
Grimwood has slashed the number of Nestlé’s product variations, such as flavor or size, by 43% to simplify operations. Nestlé also has begun shedding businessesthat no longer fit its strategy or are in weak categories. It sold most of the Jenny Craig diet business in November and the PowerBar athletic snack brand in February, for instance.
Nestlé’s next target will be frozen food, its second-biggest category in the U.S. Like other companies, Nestlé has been hit by a rapid shift away from frozen meals, as consumers gravitate to fresh foods that they perceive as healthier.
The company has begun to reposition Lean Cuisine — a pioneer in the diet food segment that suffered from rising competition and shifting tastes — to appeal to people pursuing healthy lifestyles rather than weight loss. While the brand isn’t as big as it once was, Lean Cuisine still generates nearly $1 billion in annual sales.
Another priority is ice cream, a Nestlé staple that has been losing market share to cheaper store brands. Banking on innovation, Nestlé last year came out with Haagen-Dazs gelato and Edy’s- and Dreyer’s-branded coconut water frozen fruit bars to try to tap in to the trends.