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Nestle Plc - Weighs up option including sale for two ailing Chinese Units

Nestle Plc - Nestle Said to Weigh $1 Billion Sale of Local Chinese Brands 

(Bloomberg) -- Nestle SA is weighing options including a
sale for two ailing Chinese units after years of attempting to
turn them around, people familiar with the matter said.
The food giant has been reviewing its ownership of Hsu Fu
Chi, a local confectionery brand, and Yinlu, known for its
ready-made Chinese porridge, according to the people. It is
seeking more than $1 billion for its controlling stakes in the
two companies, the people said, asking not to be identified
because the information is private.

Nestle acquired both companies in 2011 as it sought to tap
burgeoning demand in China, only to find itself confronted with
sluggish growth a few years later. Since becoming chief
executive officer in 2017, Mark Schneider has been weeding out
the Swiss company’s portfolio, jettisoning assets such as U.S.
chocolate brands, a dermatology business and a life insurance
unit for about $15 billion total.

Nestle, which makes Nespresso coffee and Gerber baby food,
has made almost two dozen divestments under Schneider. It could
opt to sell only part of its stakes in one or both of the
Chinese units, according to one of the people.

Peanut Milk, Chocolate

No final decisions have been made, and there’s no certainty
the deliberations will lead to a transaction, the people said. A
spokesman for Nestle declined to comment. Mergermarket reported
earlier that Nestle was conducting a strategic review of the
Yinlu business, citing unidentified people.

The two labels could fetch around 1.5 billion francs ($1.5
billion), MainFirst analyst Alain Oberhuber said in a note,
adding that there’s a “high probability” they’ll be divested
next year.

“Both brands suffer fierce competition from local players,”
he said.

Nestle shares rose 0.3% early Wednesday in Zurich.
Yinlu has sales of about 1 billion francs, Nestle said
earlier this month. About two-thirds of the business is made up
of local products like peanut milk and a porridge called congee,
whose sales have been “disappointing,” the CEO said at the time.

The rest is ready-to-drink coffee, which has been going better.
“We’re working very, very hard to address that situation,”
Schneider said on a call with analysts on Oct. 17. He has
repeatedly said Nestle will sell businesses that are non-
strategic if it’s not possible to fix them.

Hsu Fu Chi, which makes confectionery products and snacks,
probably generates annual revenue of some 700 million francs,
according to Vontobel analyst Jean-Philippe Bertschy. Nestle has
tried to improve the packaging of Hsu Fu Chi chocolates and
added nutritious snacks to appeal to more health-conscious
millennial consumers.