ZURICH, Switzerland – Daniel S. Loeb, a hedge fund manager whose New York-based activist fund Third Point last year took a $3.5 billion stake in Nestle, has accused the Vevey, Switzerland-based company of a “muddled strategic approach.”

“Nestle’s insular, complacent, and bureaucratic organization is overly complex, lethargic and misses too many trends,” Loeb wrote in a July 1 letter to Nestle’s top executives.

“A year ago, Third Point announced an investment of more than $3 billion in Nestle and a prescription for the company to ensure long-term value for its stakeholders by improving profitability, capital efficiency, and its portfolio following years of lackluster financial performance,” Loeb said. “Over the past year, organic sales have weakened as Nestle continues to lose market share in key focus areas and the stock has underperformed. Although the company has taken some steps consistent with our suggestions, the modest pace and magnitude of these changes suggest that Nestle feels satisfied with its position. Nestle’s Articles of Association state that the company will focus on “long-term, sustainable value creation” in operating its business. We do not believe that the company is living up to this mandate today with its muddled strategic approach, and we are concerned that Nestle does not fully appreciate the rapidly occurring shifts in consumer behavior that threaten its future.”

Loeb has urged Nestle to be sharper in articulating its strategy, noting that the company’s current strategy is “vaguely defined and plagued by internal inconsistencies.”

“Nestle describes itself as a company focused on ‘nutrition, health and wellness,’ but many categories and brands continue to fall outside that definition,” he wrote.

In addition to Loeb’s letter to Nestle’s executives, Third Point published a 34-page presentation at www.nestlenow.com. In the presentation, Third Point laid out plans for reinvigorating Nestle’s structure by separating the business into three divisions: Beverages, Nutrition and Grocery.

Beverages would comprise coffee and water; Nutrition would include pet, infant formula, medical nutrition, milk products and consumer health; and Grocery would comprise confectionery, prepared meals, ice cream and other.

Third Point said each division would benefit from having separate management teams where distinct strategies, dedicated sales forces and greater accountability would drive stronger operating performance. Separating the businesses also would allow Nestle’s CEO (currently Mark Schneider) to focus more on overall corporate strategy and capital allocation, Third Point noted in the presentation.

Loeb in his letter also urged Nestle to be bolder in reshaping the company’s portfolio, noting that management “is not moving quickly enough to exit underperforming and non-strategic businesses.”

“Nestle has divested less than 2 percent of sales despite a thriving environment for global M&A,” Loeb said. “We believe there is little to no chance that the current portfolio can sustainably deliver Nestle’s targeted mid-single digit percent organic sales growth. The portfolio continues to have significant exposure to categories external to its areas of focus that have lower growth, lower margins, and command lower valuations which, in aggregate, erode the strengths of the core businesses.”

Loeb said he would like to see Nestle divest as much as 15 percent of sales either through sales, spin-offs or other methods to better align the portfolio around key categories.

He also said he would like to see Nestle be faster in overhauling the organization, calling the company “overly complex, lethargic, and misses too many trends.” He said Nestle has been “woefully late” to participate in some key trends in the food and beverage industry, and as a result has fallen behind competitors who are capturing market share.

Responding to Loeb’s letter, Nestle issued an update on its long-term value creation strategy, saying it has delivered results through “swift and decisive action.” Over the past year the company said it has accomplished numerous goals, including transitioning to a new CEO, accelerating the repositioning of the portfolio, delivering revenue growth, investing in brands and innovation, and returning capital to shareholders.

Specific actions taken include the formation of a global coffee partnership with Starbucks, conclusion of the acquisition of global nutrition health leader Atrium Innovations, and the sale of its US confectionery business for $2.8 billion.

Nestle said it also is on track to meet its 2020 goals for margin improvement, operating profit and structural cost savings.

“Nestle has delivered strong total shareholder return over the long term (+135 percent total shareholder return in Swiss francs over the past 10 years) and continues to focus on creating sustainable shareholder value,” the company said. “Following its robust director selection process, Nestle’s shareholders recently elected three new independent directors, each of whom are world-class business leaders with strong records of successfully navigating today’s rapidly changing consumer environment and delivering results. With these new directors, Nestle has added seven new independent directors in the last three years.”

Nestle in fiscal year 2017 had total reported sales of 89,791 million Swiss francs ($97,088 million), up 0.4 percent from 89,469 million Swiss francs in the previous fiscal year. Net divestments reduced sales by 1.9 percent. Net profit of 7,200 million Swiss francs ($7,786 million) in the fiscal year was down 16 percent from a year ago.