Nestlé unveils growth model and $20.8bn share buyback scheme

Nestlé has outlined its strategic model for growth which includes expanding its presence in high-growth geographic markets.

Announced yesterday, the plan also consists of capital spending on profitable food and beverage categories such as coffee, pet care, infant nutrition and bottled water. It will also pursue growth opportunities in consumer healthcare.

Nestlé said that its announcement earlier this month to explore the possible sale of its US confectionery business ‘is consistent with this overall approach’.

In a statement the company said: “Nestlé will only prioritise external growth opportunities that fit within targeted categories and geographies, deliver attractive returns, and build on the company’s leadership position in fast growing food and beverage categories.”

As part its growth model, it plans a buyback programme of up to CHF 20 billion ($20.8 billion) worth of shares to be completed  by the end of June 2020. Should any sizeable acquisitions take place during this period, the share buyback programme will be adapted accordingly.

The announcement comes just days after American hedge fund Third Point, controlled by activist investor Dan Loeb, unveiled a $3.5 billion stake for 1.3% of the company.

The fund claimed that Nestlé has ‘significantly underperformed’ compared to its European and US rivals and called for the company to offload its non-core range and sell its stake in cosmetics maker L’Oréal.

In response, Nestlé shares surged by 4% on Monday, with investors hoping that the Third Point stake would trigger profitable changes in the company.

Yesterday’s announcement made no mention of the Third Point investment but said that the model reflects a ‘comprehensive review of the company’s capital structure and priorities to support and enhance its ability to deliver on its value creation model’.

Earlier this month Nestlé announced it was the lead investor in American ready meal company Freshly, in a bid to adapt to changing consumer tastes.