Health science at the center of Nestle's strategy
June 9, 2014
by Keith Nunes
BOSTON — The portfolio divestments Nestle has made in the past few years, which have included some portions of Jenny Craig and PowerBar, allows its executives to spend more time focusing on adding value to current businesses and such new businesses as Nestle Health Science, said Paul Bulcke, CEO.
Bulcke spoke at length about the company and its strategies June 4 at the company’s investor seminar in Boston.
“I truly believe our strategic direction is added value,” Bulcke said. “We are more science driven, we have more investments and we are living in a riskier place that is going to take us to riskier places strategically. To get higher margins you have to take out what is dragging you down; what is not adding to the party.”
Bulcke was responding to an investor’s question regarding whether the portfolio review the company has done has been a distraction for its managers and interfered with their business.
“It didn’t distract management time,” Bulcke said. “It freed up management time, because you don’t have stupid discussions about losers or discuss five times the same problems.
“The platforms we are investing in for the future are more deeply rooted in science so they cost more. That’s true. And that is the tension I have. With Nestle Health Science, the promise is big, but the investment is more than reformulating a bouillon cube. That is why we don’t allow ourselves to have laggards, because we are investing for the future.”
Bulcke described Nestle Health Science as a business that the company is building and that it is currently a non-defined market.
“This is a market in the making,” he said. “It is a market about health; health through nutrition.”
But he added that it did not just involve therapeutic health. It also is focused on keeping healthy people healthy.
“We know the best medicine is food and we know the best health keeper is healthy diets and healthy lifestyles,” he said. “We want to be part of that.”
He said there are many trends supporting Nestle’s initiative, most notably the rise in health care costs.
“We are speaking of health care costs in the trillions,” he said. “And the trillions are only in the developed world, so some extent, because the emerging markets are starting to build up their health care systems.”
Nestle has identified five platforms Nestle Health Science will focus on, including aging, brain health, intensive care, pediatrics and gastrointestinal.
“So you have these platforms, which are just a fraction of the market, but the ones we want to focus on,” Bulcke said. “We have said let’s be first and pioneer a position in a market in the making. It’s not a clear market; it’s not a clear category. There is a lot of dust that needs to settle, but we want to be in the driver’s seat.”