Billionaire activist investor Daniel Loeb’s hedge fund Third Point paid $3.5 billion for a 1.3% stake in Nestlé, characterizing the world’s largest food manufacturer of being “stuck in its old ways” and calling for changes to boost earnings.
“Nestlé has fallen behind over the past decade in an environment where growth has slowed due to changes in consumer tastes and shopping habits, as well as an influx of new competition from smaller, local brands,” he wrote in a letter to investors Sunday.
Switzerland-based Nestlé, whose 34 brands include Perrier, Nesquik, Jenny Craig and Honey Nut Cheerios, couldn’t immediately be reached for comment. Shares of Nestlé, traded on SIX Swiss Exchange, rose 3.9% in Monday morning trading.
Nestlé’s sales inched up 0.8% to $92 billion in 2016, but net profit fell 5.9%.
With new brands emerging and consumers seeking more fresh foods, sales and profit margins in the food manufacturing business have declined over the years.
“Nestlé has remained stuck in its old ways, making it impossible to deliver on the once reliable ‘Nestlé model’ that called for 5-6% organic sales growth annually and
continuous margin improvement,” Loeb said. “As a result, earnings per share have not grown in five years.”
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