SWITZERLAND – Dan Loeb, an investor activist in the Swiss transnational food and drink company, Nestle SA is demanding the group to consider restructuring and a split-up into three divisions that is beverages, nutrition and grocery.
The restructuring in addition to a ‘sharper’, ‘bolder’ and ‘faster’ focus would help boost sales as well as put itself at a competitive advantage on prospective opportunities, according to a Reuters report.
Loeb holds a 2.5% stake in Nestle SA after Third Point Hedge Fund, an investment firm run by Loeb invested about US$3.5 billion in Nestle in 2017.
The investor alleges the split would hold management accountable and reduce ‘layers of bureaucracy’.
“This is a call for urgency – rather than incrementalism – to capitalize on fleeting opportunities and innovations that competitors will capture if Nestle does not energize itself,” said Loeb in a letter to Nestlé’s board.
‘Complex organisational structure impacting output’
The letter demanded that Nestle spin off more businesses that do not fit its strategy including ice cream, frozen foods, and confectionary then add an outsider to the board with expertise in the food and beverage business.
Among concerns addressed in the letter include slow sales growth, declining stock price and its failure to sell off more pieces that do not fit its “nutrition health and wellness strategy.
To simplify a ‘complex’ organisational structure, Loeb proposed that each division should have its own CEO, regional structure and marketing heads.
“Nestle’s insular, complacent, and bureaucratic organization is overly complex, lethargic, and misses too many trends,” Loeb said in the letter.
Mr. Loeb wants the company to focus on its nutrition, health and wellness segment.
In 2017 Nestle saw a 2.4% organic sales growth, its slowest in more than two decades while pre-tax profit fell to US$9.5bn in the year.