Nestle sets out 10 year health and wellness model

By staff reporter

- Last updated on GMT

Related tags Nestlé Nutrition

Nestle is eyeing organic growth in health, wellness and nutrition
of five to six per cent over the next ten years, the chief
financial officer was due to told investors at a seminar today.

Nestle has made no secret of its focus on nutrition, health and wellness company.

At the seminar, which forms part of one and a half days of presentations on Nestlé's strategic transformation, CFO Paul Polman set out Nestle's model for the next ten years.

his combines the organic growth targets with year-after-year improvement on EBIT margin and responsible capital management.

Over the last ten years organic growth has averaged 5.8 per cent per annum, and group EBIT margin has averaged 30bps improvement.

The indication is that Nestle expects this growth story to continue, underscoring confidence in its strategy as the right one in the current food and consumer climate.

Polman set out some key areas that the company is targeting.

Firstly, consumer demands and needs are changing on a global basis, driven largely by a growing and ageing population.

World population is expected to increase to 9.1bn by 2050 - up from 6.5bn in 2005; and 21 per cent of people will be over the age of 60 in 2050, compared to 10 per cent in 2000.

Within Nestle's overall view of health and nutrition as a growth engine, Polman identified a $70bn opportunity in delivering nutrition and affordability in developing markets.

For nutrition, health and wellness in Nestle Food and Beverages he said the opportunity was $75bn; and in nutrition for specific need states, $100bn.

Nestle's approach to research and development is to combine internal resources with external assets.

Worldwide, it employs some 4,500 people in R&D, with R&D spend at 1.8 per cent of sales.

Externally, however, it taps into technologies and expertise of more than a million researchers worldwide, more than 1,500 science universities, venture capital, more than 50,000 scientists and engineers amongst its strategic suppliers, and more than 50,000 scientists and engineers in government laboratories.

Professor Peter van Bladeren, Nestle's director of science and research, told in a recent exclusive interview that he sees collaboration as key to Nestlé's success.

Nestlé has three types of collaboration: simple contract work carrying out clinical trials or analytical work; a large number of small collaborations with universities and research institutes; and a limited number of big alliances.

One such alliance, and Nestlé's largest collaboration with a university or research institute, was signed in November of last year with the Swiss Federal Institute of Technology to investigate the role of nutrition in cognitive function.

The company will contribute up to CHF 5 million (€ 3.1 million) every year for five years.

In Q1 2007 the Swiss food giant reported overall sales of CHF 24.251bn (€14.77bn), representing 7.4 per cent organic growth.

Although Nestle said this growth was partly due to higher demand in advance of expected price increases (particularly in dairy and pet care), it also saw the quarter as evidence that its health-drive is a strategy in the right direction.

Significantly, the Nestle Nutrition business unit achieved its target 10 per cent organic growth on a like-for-like basis for the first time (sales were CHF 1.632bn (€0.99bn), up from CHF 1.349 bn (€0.8bn) for the same period of 2006).

"These encouraging figures reflect the acceleration of our move towards nutrition, health and wellness across our main food and beverage brands, as well as the strong performance of our globally-managed Nestle Nutrition unit," said chairman and CEO Peter Brabeck-Letmathe.

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