Investors Warn Nestlé's Junk Food Empire Creates "Systemic Risks" For Future Returns

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by Tyler Durden
Thursday, Apr 20, 2023 - 01:50 PM

A group of institutional investors with stakes in the world's largest food company, Nestlé, issued a statement calling on the company to improve its portfolio of unhealthy food and drinks. The investors say Nestlé's "over-reliance on sales" of junk food could pose "systemic risks" to financial returns amid emerging trends to improve health worldwide. 

"We have been engaging, as shareholders, with the world's largest food manufacturers seeking shifts in their strategy away from over-reliance on sales of less healthy products," shareholders with more than $3 trillion in combined assets under management wrote in a public statement. They seek to rebalance the food portfolio of the Switzerland-based company "to be at the forefront of the industry when it comes to supplying the world with healthy diets." 

The public statement, published by investment charity ShareAction and signed by institutions and public pension funds, was released ahead of Nestlé's annual general meeting in Lausanne, Switzerland, on Thursday. 

Simon Rawson, Deputy CEO of ShareAction, said:

"Nestlé has said it wants to sell more healthier food, but it hasn't given assurance that it will also address its less healthy food sales, which is essential to turn the tide against the harmful effects of diet related ill health.

"Nestlé has an opportunity to stay ahead of food-related regulation and evolving stakeholder expectations. Recent research published by the World Obesity Federation showed that more than half of the world's population will be living with overweight or obesity by 2035 unless serious and immediate action is taken. Nestlé, as the world's largest food and drink manufacturer, could do so much more to support population health."

The investors' intervention comes as governments have introduced taxes on junk food and restrictions on advertising to combat the global obesity crisis. 

In a recent study commissioned by the World Action on Salt, Sugar & Health, Nestlé was found to be one of the largest food manufacturers in the world that were overly reliant on junk food sales. 

The Financial Times said Nestlé acknowledged more than 60% of its food and drinks products in 2021 failed to meet a "recognized definition of health" and that "some of our categories and products will never be 'healthy' no matter how much we renovate." 

Investors have figured out that Nestle's junk food empire of sugar and fat is set to crumble as the company must evolve.