Nestle, the world's largest packaged food firm, is reorganising its infant nutrition unit to compete with regional rivals, the latest in a string of shake-ups for global packaged goods companies struggling to reignite sales. The Swiss maker of Gerber baby food and Illuma formula said on Wednesday it would appoint regional managers for the $10 billion business to address local trends faster.
The change comes five months after Nestle's new CEO listed its highly profitable infant formula as a priority focus. Consumer groups like Nestle, Unilever and Procter & Gamble are under intense investor pressure to lift margins as people flock to smaller, independent brands. Infant nutrition is a key battleground for Nestle and rivals such as Danone, which also ranks its baby unit as its most profitable, and Reckitt Benckiser, which recently bought Mead Johnson, the maker of infant formula Enfamil.
Major brands still retain consumer trust that they have lost in other areas of packaged food, particularly in China, a big focus for future growth due to its growing affluence and a policy to allow two children per family instead of one. Nestle has come under pressure to shift gear from activist shareholder Third Point, which in June revealed a $3.5 billion stake. Nestle has satisfied some demands, such as buying back shares and setting a margin target.
Nestle said it would manage some areas of infant nutrition globally via a "strategic business unit" for innovation, quality management, compliance and global manufacturing capacity. But the position of global nutrition head will be replaced by three regional business chiefs. Current Nutrition head Heiko Schipper leaves at the end of 2017, to lead Bayer AG's consumer health unit.
Nestle already manages most of its businesses regionally, with exceptions such as bottled water, Nespresso, Nestle Health Science and Nestle Skin Health. "The new organisation will allow Nestle's infant nutrition business to deliver accelerated organic growth and realise further efficiency gains," Nestle said, adding it would allow it to be more "agile and efficient" in responding to local demands.