Nestlé fund targets foods, processing techniques

By Ahmed ElAmin

- Last updated on GMT

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Nestlé is on the hunt for start-up companies developing new foods
and processing techniques targeting the health and nutrition

The company today announced it was earmarking €500 million for a special venture capital fund to be invested in scientific research and start-ups across the world. The company is attempting to follow its changing market. Nutritionists have singled out processed foods as a major culprit in the rise of obesity, and consumers have started to demand healthier andmore nutritional products. Other companies have also declared a focus on research and development as a means of becoming more competitive and reaching such consumers. Last week Heinz said it would spend more on increasedinnovation in new products, recipes and packaging as a key contributor to sales and profit margin growth. Nestlé's new fund is a big part of the company's strategy over the past several years to transform itself from a food and beverage company to one with a big foot in the growing health and nutritionmarket, said Francois-Xavier Perroud, a group spokesperson. He told that the fund would have a broad mandate in the types of processes and foods in which it would put money into. "There is no specific process that we are looking at," he said. "It would be wrong to give the edge to any one area. There are special processes well suited for any givenproduct range." The fund will target mainly startups, but is not limited to them. Nestlé already has a corporate venture fund, one that is mainly focused on scientific research and the resulting startups. The newfund will especially target companies on the verge of going to market but is not limited to them. "The new step will contribute significantly to fostering and accelerating the group's expansion into health, wellness and nutrition, as the new fund will be investing in companies withproducts or processes in the final testing stage or about to come on the market," he said. Through the fund Nestlé will boost such companies into a size that would allow them to be integrated into the mainstream business units of the group, Perroud said. For companies that did not fit Nestlé would consider making an initial public offering or making a private sale. Wolfgang Reichenberger, Nestlé's current chief financial officer, will run the fund in partnership with Gunnar Weikert, the chairman of Inventages Venture Capital Investments. Reichenberger will leave Nestlé at the start of 2006 to manage the fund full time. The company has appointed Paul Polman to replace Reichenberger as chief financial officer. Polman is the formergroup president of Procter & Gamble's European division. Swiss-based Nestlée is facing tough home markets on the continent. Like its competitors Nestle has struggled to boost sales as consumers rein in spending in Europe. Europe's supermarkets have beencutting prices to meet the challenge of discounters, forcing producers to provide goods for less at a time when input and commodity and fuel costs have been rising. Nestlé depended on its pet business, beverages and ice creams to keep overall sales growth humming at 5.2 per cent during the first half of this year, although Europe remained sluggish at 1.5 percent growth. During the first half of 2005, European food sales bounced back into positive territory from a fall of almost one per cent in the first quarter of 2005. Sales in Europe grew on a like-for-likebasis to 1.5 per cent in the first half of the year. Increased pet food sales and the UK helped pull results back into positive territory. The company reported tough markets in France, Germany and Italy. Eastern Europe organic sales rose 6.2 per cent. Europe accounts for one-third of the company's sales, with the US another 31 per cent. Asia, Oceania and Africa, water sales and pharmaceutical products make up the rest. By segment, sales growth was led by the company's high margin beverages division (6.4 per cent), milk, nutrition and ice cream (5.2 per cent), and by pet care (5.3 per cent). Beverages account for26 per cent of the company's sales, while milk products, nutrition and ice cream make up 28 per cent. External links to companies or organisations mentioned in this story: Nestlé

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