With that much cash at its disposal, Europe’s biggest company by market value could buy almost any publicly traded food business. Analysts are having a field day speculating on where the money will be spent, while many investors have said they want the chocolate/ice cream/bottled water company to expand in emerging markets to catch up with Unilever, which derives around half of its sales in developing countries.
The only listed non-alcoholic beverage and food companies with market capitalisations greater than $28.1bn are Groupe Danone, Kraft, The Coca- Cola Company, PepsiCo and Unilever.
“The world is their oyster, but the pearls can’t be too expensive,” said Thornburg Investment Management fund manager Wendy Trevisani, a fund manager at which has more than $700m invested in Nestlé shares. “They’re clearly a laggard in emerging markets.”
Nestlé estimates that a billion consumers in emerging markets will see their income increase sufficient to afford the company’s products within the next 10 years. It currently gains around one third of its revenue from emerging economies, and CEO Paul Bulcke aims to lift that to 45% within a decade.
Since taking over as CEO in April 2008, Bulcke has made only one purchase of more than $1bn: the $3.7bn purchase of Kraft’s North American frozen pizza business, announced a day after the Alcon sale. The CEO has pledged to spend as much as 3bn francs a year on acquisitions of smaller companies.
At the end of June, Frits van Dijk, head of Nestlé’s Asian business, said that the company may purchase bottled water businesses in markets such as China, while Nestlé Waters CEO John Harris said that the company has a list of five new markets it would like to enter.
According to David Hayes of Nomura, “They’re going to use the money to buy assets, at least a big chunk of it”. Hayes thinks Nestlé may look at General Mills, which has a market value of $24.8bn. In a May report, Euromonitor said that HJ Heinz or Hershey could also be targets.
Sources: The Economic Times, Bloomberg, Nestlé
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