Original Story: cnbc.com
The world will run out of fresh water long before it runs out of oil, with the potential for major deficits by 2030, the chairman of bottled water giant Nestle said.
"We have a major water management crisis," Peter Brabeck-Letmathe told CNBC on the sidelines of the Credit Suisse Asian Investment Conference on Tuesday. "We are destroying 20 percent more water for human consumption than there is available."
Around 1.2 billion people, or almost one-fifth of the world's population, live in areas of physical scarcity, and 500 million people are approaching this situation, according to data from the United Nations. Another 1.6 billion people, or almost one quarter of the world's population, face economic water shortage. An Atlanta natural resources lawyer is reviewing the details of this case.
In addition to reducing the company's water consumption by more than 60 percent over the past few years even as it increased production, Nestle has been working with governments to find better ways to use water sustainably, he said.
A risk
It's not an entirely altruistic step for the company, which had an around 12 percent share of the bottled water market globally in 2013, according to data on its website.
"For a food company like Nestle, this is a direct and an indirect risk. The entire value chain is exposed to it, from the farmers which have been producing our raw materials up to the consumers," Brabeck-Letmathe said in a presentation at the conference. "This is the reason we got involved in the water issue." A Memphis business lawyer assists clients with safeguarding the continuity of their business.
Within the company, Nestle has created a "shadow price" for water for its operations locally, to ensure it's given a value to make it psychologically more difficult to waste, said Brabeck-Letmathe.
Political concern
Charging for water can be a lightning rod for political criticism amid concerns that the poor will lose access to a necessity.
"Water is a human right. I fully agree with that," Brabeck-Letmathe said, noting that the around 30 liters a day needed for basic living should be provided without charge to those who can't afford it. But that amount only accounts for around 1.5 percent of the fresh water destroyed daily, he said.
He's more concerned about the other 98.5 percent. "I don't think it's a human right to fill up a swimming pool. I don't think it's a human right to wash cars. I don't think it's a human right to water a golf course," he said.
Growing investment gap
In addition to general concerns about wasteful use, Brabeck-Letmathe noted that water infrastructure has a growing investment gap, estimating the global minimum needed is around $770 billion a year, with the annual deficit running at around $250 billion.
"Infrastructure is falling apart," he said, adding it's not just an emerging market problem, with around 35 percent of water in London lost due to poor infrastructure.
Criticism
To be sure, despite the advocacy on the issue, Nestle has faced criticism for its use of water.
In California, which is suffering through an around three-year-long drought of historic proportions, the company has continued to produce bottled water.
About 1.39 liters of water is needed to make one liter of bottled water, according to the industry trade group, the International Bottled Water Association. A Tulsa natural resources lawyer is following this story closely.
While the state has introduced some harsh restrictions, including fines of up to $500 for overwatering lawns, Nestle has largely sidestepped them by purchasing its water from a spring in Millard Canyon, California, some 80 miles east of Los Angeles, located on the Morongo Indian Reservation. Because the reservation is considered a sovereign nation, it's not under any obligation to comply with state laws concerning the drought. Critics have also pointed to concerns over Nestle shipping the bottled water out of the parched state.
"We regularly engage with Tribal water officials on the current drought situation and water resource management at Cabazon to ensure the long-term sustainability of this water supply," Nestle told CNBC via email. It said the bottling facility's water use is around 0.2 percent of total water demand in the neighboring Coachella Valley.
Showing posts with label Nestle. Show all posts
Showing posts with label Nestle. Show all posts
Monday, April 6, 2015
Tuesday, October 26, 2010
Nestle's Pet Food, Nespresso Pods Help Defy Price Squeeze
Bloomberg
Nestle SA’s direct sales of Nespresso coffee capsules and Purina pet food have given the world’s largest foodmaker an edge in pricing.
The maker of KitKat chocolate will probably say tomorrow that pricing added 1.5 percentage points to sales growth in the first nine months of 2010, the same as in the first half, according to the median estimate of 10 analysts.
By selling through Nespresso’s website and speciality retailers such as pet stores, Nestle faces less pressure on prices from supermarkets. About a third of revenue comes from those sources, compared with 15 percent for Groupe Danone SA and 11 percent for Unilever, ING analysts estimate. Nestle has 7,000 saleswomen who peddle goods door-to-door in Brazilian slums and uses carts to sell ice cream in the Philippines.
“Nestle stands out in pricing power,” said Marco Gulpers, an analyst at ING Wholesale Banking who has a “buy” recommendation on Vevey, Switzerland-based Nestle. “That also highlights why Nestle is much less volatile compared to Danone or Unilever.”
Unilever, the maker of Ben & Jerry’s ice cream and Knorr soup, has said it doesn’t expect prices to increase until the fourth quarter. Danone’s pricing rose 0.6 percent in the third quarter, counter to analysts’ predictions of a decline and the first growth in more than a year. Nestle has reported higher pricing each year for the past decade.
Paul Matthews, a spokesman for Unilever, and Nina Backes, a spokeswoman for Nestle, declined to comment on the ING estimates. Sabrina Schneider, a spokeswoman for Danone, didn’t respond to requests for comment.
U.S. Strategy
Nestle, Europe’s second-largest company by market value, is holding its nine-month sales press conference outside of Switzerland for the first time and will highlight its U.S. strategy. Chief Executive Officer Paul Bulcke, Chief Financial Officer Jim Singh, as well as the heads of Nestle USA, Nestle’s U.S. Nutrition unit, Purina and North America bottled water, will attend the New York briefing.
The company gets about a third of its sales from the Americas, compared with about 22 percent from Europe, where growth has been slower to recover from the global recession. Nestle bought Kraft Food Inc.’s frozen-pizza business this year to bolster its share of the U.S. food market and started selling its Dolce Gusto coffee systems and espresso makers this month at Wal-Mart Stores Inc., the nation’s biggest retailer.
Cash for Investment
The Swiss company is $28.3 billion richer after selling a stake in Alcon Inc. to Novartis AG. Nestle said in August it will “substantially” reduce net debt and Singh said in June the company prefers to use cash to invest in its own business or make acquisitions rather than buying back shares.
Nestle may say so-called organic sales, which exclude acquisitions and disposals, rose 5.6 percent in the third quarter, according to the median estimate, compared with 6.1 percent growth in the first six months of the year.
Danone, the world’s largest yogurt maker, said today that third-quarter revenue excluding acquisitions and currency shifts increased 6.9 percent, broadly maintaining the first half’s pace and beating analysts’ estimates. Lower pricing cut 1.7 percentage points from nine-month sales.
Unilever’s food and beverage comparable sales probably rose 3.4 percent in the third quarter, according to an estimate by Pablo Zuanic, an analyst at Liberum Capital. The company, which is based in London and Rotterdam, is scheduled to report earnings on Nov. 4.
‘Affordable Treats’
Analysts expect Nestle to announce a “robust operating performance in spite of the challenging macro conditions,” wrote Nic Sochovsky, an analyst at Unicredit in London. He rates the shares “buy,” citing the company’s pricing “discipline.”
Nestle shares have advanced 14 percent in the past year, compared with a 5.2 percent increase for Paris-based Danone and a 1.4 percent gain for Unilever.
The Swiss company’s ability to charge more is helped by its strength in products whose sales tend to resist price increases, according to David Hayes, an analyst at Nomura. Nestle ranks as the world’s biggest maker of coffee, bottled water, shelf-stable milk, baby formula, pet food and frozen pizza.
Shoppers will cut spending on their family before turning to cheaper pet-food brands, Bulcke has said.
“Nestle benefits compared to its peers on a number of counts -- much of its portfolio is in affordable treats or necessities which are resistant to downtrading,” said Jon Cox, an analyst at Kepler Capital Markets in Zurich.
Sunday, October 3, 2010
Nestlé to Expand Business in Health Care Nutrition
NY Times
Nestlé said on Monday that it planned to invest more than $500 million over the next decade to develop health and wellness products to help prevent and treat major ailments like diabetes and obesity.
Nestlé will create a wholly owned subsidiary, Nestlé Health Science, as well as a research body, the Nestlé Institute of Health Sciences, “to pioneer a new industry between food and pharma,” the company said in a statement.
The company, which is based in Vevey, Switzerland, said the initiatives would seek to develop nutritional products for diseases like diabetes, obesity, cardiovascular disease and Alzheimer’s, which are placing an increasing burden on governments at a time when budgets are being squeezed.
“It is our strong conviction that disease prevention will have to play a much bigger role” in future health spending, Nestlé’s chairman, Peter Brabeck-Letmathe, told a news conference in Lausanne.
According to the World Health Organization, more than 220 million people worldwide suffer from diabetes and about 18 million people have Alzheimer’s. By 2030, almost 23.6 million people are expected to die from cardiovascular diseases, the leading cause of deaths worldwide.
The company said it planned to invest about 500 million Swiss francs ($509 million) over the next decade in the new areas.
The new business unit will be “run at arm’s length” from the main food, beverage and nutrition activities, Nestlé said, and it will incorporate the existing Nestlé HealthCare Nutrition business, which had sales of about $1.6 billion in 2009.
Analysts said the path appeared to be relatively clear for Nestlé, which would be able to extend its existing strengths in research and distribution.
Nestlé will be competing in part with pharmaceutical companies like Abbott Laboratories, which makes nutritional supplement drinks, as well as diversified groups like Unilever, which owns the weight management brand Slim-Fast.
“Nestlé is tackling a new industry,” said Jean-Philippe Bertschy, an analyst at Bank Vontobel in Zurich. “It’s quite hard to define what the market for this will be.”
But he said that Nestlé had the money to expand without requiring a return on investment for some time. Nestlé should be almost debt-free by the end of the year, he said, in part because it received $28.3 billion from the pharmaceutical company Novartis last month for a majority stake in the Alcon eye care division.
The new focus is unlikely to dent Nestlé’s status as the “clear leader in the food sector,” Mr. Bertschy added.
Nestlé has 280,000 employees and brands that include Kit Kat chocolate bars and San Pellegrino bottled water. Its annual sales of about nearly $102 billion are more than double its nearest competitor, Kraft of the United States. Other global competitors in food include Danone of France.
Nestlé declined to provide any more specific targets for its new venture, but Luis Cantarell, who will head the new unit, described it as “an opportunity that is more in billions than millions.”
Nestlé will create a wholly owned subsidiary, Nestlé Health Science, as well as a research body, the Nestlé Institute of Health Sciences, “to pioneer a new industry between food and pharma,” the company said in a statement.
The company, which is based in Vevey, Switzerland, said the initiatives would seek to develop nutritional products for diseases like diabetes, obesity, cardiovascular disease and Alzheimer’s, which are placing an increasing burden on governments at a time when budgets are being squeezed.
“It is our strong conviction that disease prevention will have to play a much bigger role” in future health spending, Nestlé’s chairman, Peter Brabeck-Letmathe, told a news conference in Lausanne.
According to the World Health Organization, more than 220 million people worldwide suffer from diabetes and about 18 million people have Alzheimer’s. By 2030, almost 23.6 million people are expected to die from cardiovascular diseases, the leading cause of deaths worldwide.
The company said it planned to invest about 500 million Swiss francs ($509 million) over the next decade in the new areas.
The new business unit will be “run at arm’s length” from the main food, beverage and nutrition activities, Nestlé said, and it will incorporate the existing Nestlé HealthCare Nutrition business, which had sales of about $1.6 billion in 2009.
Analysts said the path appeared to be relatively clear for Nestlé, which would be able to extend its existing strengths in research and distribution.
Nestlé will be competing in part with pharmaceutical companies like Abbott Laboratories, which makes nutritional supplement drinks, as well as diversified groups like Unilever, which owns the weight management brand Slim-Fast.
“Nestlé is tackling a new industry,” said Jean-Philippe Bertschy, an analyst at Bank Vontobel in Zurich. “It’s quite hard to define what the market for this will be.”
But he said that Nestlé had the money to expand without requiring a return on investment for some time. Nestlé should be almost debt-free by the end of the year, he said, in part because it received $28.3 billion from the pharmaceutical company Novartis last month for a majority stake in the Alcon eye care division.
The new focus is unlikely to dent Nestlé’s status as the “clear leader in the food sector,” Mr. Bertschy added.
Nestlé has 280,000 employees and brands that include Kit Kat chocolate bars and San Pellegrino bottled water. Its annual sales of about nearly $102 billion are more than double its nearest competitor, Kraft of the United States. Other global competitors in food include Danone of France.
Nestlé declined to provide any more specific targets for its new venture, but Luis Cantarell, who will head the new unit, described it as “an opportunity that is more in billions than millions.”
Wednesday, June 30, 2010
Nestle's $28.1 Billion Payday Gives It Google-Size Cash Pile for Purchase
Bloomberg
Nestle SA has a $28.1 billion question and investors have plenty of answers.
Europe’s largest company by market value could buy almost any publicly traded food asset with cash when it gets paid for its Alcon Inc. stake in the second half. Investors want the maker of KitKat bars and Haagen-Dazs ice cream to expand in emerging markets to catch up with Unilever, which gets about half of its sales in developing countries.
“The world is their oyster, but the pearls can’t be too expensive,” said Wendy Trevisani, a fund manager at Thornburg Investment Management in Santa Fe, New Mexico, which has more than $700 million invested in Nestle shares. “They’re clearly a laggard in emerging markets.”
Nestle will receive $28.1 billion from Novartis AG for its majority stake in Alcon, the maker of Opti-Free contact lens cleaners, giving it a cash pile exceeding the $26.5 billion that Google Inc. had on its books at the end of March. The Swiss company is starting a new 10 billion-franc buyback program, though Nestle would rather invest in its business or make acquisitions, Chief Financial Officer Jim Singh said June 22.
About 1 billion consumers in emerging markets will increase their incomes enough to be able to afford Nestle products within the next decade, the Vevey, Switzerland-based company estimates. The world’s largest food company gets about a third of its revenue from emerging economies and Chief Executive Officer Paul Bulcke aims to lift that to 45 percent within a decade.
Nestle’s sales in emerging markets rose 8.5 percent last year, double the rate of the total company’s revenue.
Bottled Water?
Shares in Nestle, which no analyst recommends selling according to 42 ratings tracked by Bloomberg, are up 5.3 percent this year. Unilever has risen 1.4 percent. Kraft Foods Inc., the world’s second-largest foodmaker, has gained 6.5 percent.
Nestle may purchase bottled water businesses in markets such as China, Frits van Dijk, head of Nestle’s Asian business, said June 22. Acquisitions would also be considered to expand its business selling nutrition products for athletes such as PowerBar, Nestle Nutrition CEO Richard Laube said.
Possible targets may include Synutra International Inc., the $950 million Chinese infant-formula company, according to Katherine Lu, an analyst at Oppenheimer & Co. Nestle should consider buying natural pet-food makers to better compete with Procter & Gamble Co., which agreed to buy Natura Pet Products Inc. on May 5, or enter new bottled water markets in India and Africa, said James Targett, an analyst at Consumer Equity Research. Nestle Waters CEOJohn Harris said June 18 the company has a list of five new markets it would like to enter.
Frozen Pizza
“The cash lets Nestle have the stomach to invest behind their existing businesses and markets,” said Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania, which holds more than $350 million of Nestle shares for clients. “They have the field pretty much to themselves at the moment.”
Nestle spokesman Ferhat Soygenis declined to comment.
Bulcke, 55, has made only one purchase of more than $1 billion since taking over as CEO in April 2008, the $3.7 billion purchase of Kraft’s North American frozen pizza business announced one day after the Alcon sale. The CEO has pledged to spend as much as 3 billion francs a year on acquisitions of smaller companies, and Nestle has said the company doesn’t need to make “transformational” purchases.
The cash due from Novartis is enough to buy any of Nestle’s rivals in food and non-alcoholic beverages save the six biggest. That includes adding a 22 percent average premium that Nestle paid for its acquisitions of listed companies since 2000.
Possible Targets
“They’re going to use the money to buy assets, at least a big chunk of it,” said David Hayes of Nomura. According to Hayes, Nestle may look at General Mills Inc., the maker of Betty Crocker cake mix, which has a market value of $24.8 billion.
The only listed food and non-alcoholic beverage companies with market capitalizations of more than $28.1 billion are Coca- Cola, PepsiCo, Unilever, Kraft and Groupe Danone SA.
H.J. Heinz Co. or Hershey Co. could also be targets for Nestle, Euromonitor said in a May 20 report. Heinz would allow scope for lower costs in culinary aids and baby food, and Hershey would strengthen Nestle in its weakest region for chocolate, the market research company said. Heinz has a market value of about $14 billion and Hershey is valued at $11 billion.
Nestle should avoid buying big companies that would make managers spend too much time selling assets to satisfy antitrust regulators, Thornburg’s Trevisani said.
“Ideally they find a few hidden gems like Nespresso out there that may not look great at first glance, but over time develop into really viable growth businesses,” Trevisani said.
Share Buybacks
Investors would also like to see share buybacks and dividends funded by the money it will receive for selling the stake, said Joerg de Vries-Hippen, who counted Nestle as the biggest stake in his Allianz RCM Swiss Fund at the end of 2009.
“The right thing is a mix,” said de Vries-Hippen, who helps manage 16 billion euros ($19.5 billion) at Allianz Global Investors in Frankfurt. “If you’d win the big jackpot, 30 million, and the first thing you do is buy a big house, 10 cars and maybe give your family a lot of money, in the end you will have lost all your money.”
Nestle needs to give investors more clarity on what it will do with the money, or else analysts might become less willing to recommend buying the stock, said S&P’s Short. He moved to “hold” from “strong buy” in October, partly on such concern.
“It becomes a bit of a problem, because if you’re telling someone to buy the stock, they can turn around and say ‘what am I really buying?’” Short said. “You could buy Nestle today and in six weeks time, it’s a completely different company.”
Europe’s largest company by market value could buy almost any publicly traded food asset with cash when it gets paid for its Alcon Inc. stake in the second half. Investors want the maker of KitKat bars and Haagen-Dazs ice cream to expand in emerging markets to catch up with Unilever, which gets about half of its sales in developing countries.
“The world is their oyster, but the pearls can’t be too expensive,” said Wendy Trevisani, a fund manager at Thornburg Investment Management in Santa Fe, New Mexico, which has more than $700 million invested in Nestle shares. “They’re clearly a laggard in emerging markets.”
Nestle will receive $28.1 billion from Novartis AG for its majority stake in Alcon, the maker of Opti-Free contact lens cleaners, giving it a cash pile exceeding the $26.5 billion that Google Inc. had on its books at the end of March. The Swiss company is starting a new 10 billion-franc buyback program, though Nestle would rather invest in its business or make acquisitions, Chief Financial Officer Jim Singh said June 22.
About 1 billion consumers in emerging markets will increase their incomes enough to be able to afford Nestle products within the next decade, the Vevey, Switzerland-based company estimates. The world’s largest food company gets about a third of its revenue from emerging economies and Chief Executive Officer Paul Bulcke aims to lift that to 45 percent within a decade.
Nestle’s sales in emerging markets rose 8.5 percent last year, double the rate of the total company’s revenue.
Bottled Water?
Shares in Nestle, which no analyst recommends selling according to 42 ratings tracked by Bloomberg, are up 5.3 percent this year. Unilever has risen 1.4 percent. Kraft Foods Inc., the world’s second-largest foodmaker, has gained 6.5 percent.
Nestle may purchase bottled water businesses in markets such as China, Frits van Dijk, head of Nestle’s Asian business, said June 22. Acquisitions would also be considered to expand its business selling nutrition products for athletes such as PowerBar, Nestle Nutrition CEO Richard Laube said.
Possible targets may include Synutra International Inc., the $950 million Chinese infant-formula company, according to Katherine Lu, an analyst at Oppenheimer & Co. Nestle should consider buying natural pet-food makers to better compete with Procter & Gamble Co., which agreed to buy Natura Pet Products Inc. on May 5, or enter new bottled water markets in India and Africa, said James Targett, an analyst at Consumer Equity Research. Nestle Waters CEOJohn Harris said June 18 the company has a list of five new markets it would like to enter.
Frozen Pizza
“The cash lets Nestle have the stomach to invest behind their existing businesses and markets,” said Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania, which holds more than $350 million of Nestle shares for clients. “They have the field pretty much to themselves at the moment.”
Nestle spokesman Ferhat Soygenis declined to comment.
Bulcke, 55, has made only one purchase of more than $1 billion since taking over as CEO in April 2008, the $3.7 billion purchase of Kraft’s North American frozen pizza business announced one day after the Alcon sale. The CEO has pledged to spend as much as 3 billion francs a year on acquisitions of smaller companies, and Nestle has said the company doesn’t need to make “transformational” purchases.
The cash due from Novartis is enough to buy any of Nestle’s rivals in food and non-alcoholic beverages save the six biggest. That includes adding a 22 percent average premium that Nestle paid for its acquisitions of listed companies since 2000.
Possible Targets
“They’re going to use the money to buy assets, at least a big chunk of it,” said David Hayes of Nomura. According to Hayes, Nestle may look at General Mills Inc., the maker of Betty Crocker cake mix, which has a market value of $24.8 billion.
The only listed food and non-alcoholic beverage companies with market capitalizations of more than $28.1 billion are Coca- Cola, PepsiCo, Unilever, Kraft and Groupe Danone SA.
H.J. Heinz Co. or Hershey Co. could also be targets for Nestle, Euromonitor said in a May 20 report. Heinz would allow scope for lower costs in culinary aids and baby food, and Hershey would strengthen Nestle in its weakest region for chocolate, the market research company said. Heinz has a market value of about $14 billion and Hershey is valued at $11 billion.
Nestle should avoid buying big companies that would make managers spend too much time selling assets to satisfy antitrust regulators, Thornburg’s Trevisani said.
“Ideally they find a few hidden gems like Nespresso out there that may not look great at first glance, but over time develop into really viable growth businesses,” Trevisani said.
Share Buybacks
Investors would also like to see share buybacks and dividends funded by the money it will receive for selling the stake, said Joerg de Vries-Hippen, who counted Nestle as the biggest stake in his Allianz RCM Swiss Fund at the end of 2009.
“The right thing is a mix,” said de Vries-Hippen, who helps manage 16 billion euros ($19.5 billion) at Allianz Global Investors in Frankfurt. “If you’d win the big jackpot, 30 million, and the first thing you do is buy a big house, 10 cars and maybe give your family a lot of money, in the end you will have lost all your money.”
Nestle needs to give investors more clarity on what it will do with the money, or else analysts might become less willing to recommend buying the stock, said S&P’s Short. He moved to “hold” from “strong buy” in October, partly on such concern.
“It becomes a bit of a problem, because if you’re telling someone to buy the stock, they can turn around and say ‘what am I really buying?’” Short said. “You could buy Nestle today and in six weeks time, it’s a completely different company.”
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