Nestle to explore strategic options for skin health unit

Group says review should be completed by next year

GENEVA: Nestle SA chief executive officer Mark Schneider took another step toward sharpening the food giant’s portfolio, putting the company’s skin-care business with sales of 2.7 billion Swiss francs (US$2.8bil) on the block.

The maker of Nescafe and KitKat said it had opened a strategic review of its skin-health unit that should be completed by mid-2019.

Nestle Skin Health’s future opportunities “lie increasingly outside the group’s strategic scope,” the company said.

Nestle has been buying and selling businesses at an accelerated pace under Schneider amid pressure from activist investor Dan Loeb to focus on its main food and beverage businesses.

Selling dermatological brands would dismantle a business that his predecessor Paul Bulcke touted as a promising new avenue of growth.

“Our board is convinced that exploring strategic options for Nestle Skin Health is in the best long-term interest of this business and Nestle shareholders,” said Bulcke, who became chairman when Schneider became CEO last year.

Loeb’s Third Point hedge fund has called on the company to increase shareholder returns. In a January letter, Loeb said Nestle’s foray into dermatology seems unrelated to its core business and should be unwound.

Nestle Skin Health makes products ranging from injectable skin fillers that compete with Botox to acne medicines. The unit had sales of about 2.7 billion Swiss francs (US$2.8bil) last year.

The unit has been a weak spot for the company having faced competition from generics, and is cutting hundreds of jobs and closing sites.

“One of the CEO’s top priorities at the beginning of his mandate was to stop the hemorrhaging, which had been tolerated for some time,” Jean-Philippe Bertschy, an analyst Bank Vontobel AG, wrote in a note.

The unit had engaged in “record value destruction in the past four years,” and now Nestle is “executing like a metronome.”

The business was built out of a joint venture called Galderma that Nestle formed with L’Oreal SA in 1981.

Nestle paid L’Oreal more than US$3bil to buy the business out in 2014 and in the following months paid a further US$1.4bil to buy a portfolio of skin-care drugs from Valeant Pharmaceuticals.

This week Nestle agreed to sell Gerber Life Insurance to Western & Southern Financial Group for US$1.55bil as it considers such financial products outside its main business.

Nestle is also considering selling European lunch-meat brand Herta amid stagnating sales, a person familiar with the matter said in June. — Bloomberg at