Hot Pockets in hot seat at Nestle

by Josh Sosland
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Nestle is working to fix its frozen foods business.

LONDON — A month after Nestle S.A. executives described steps they are taking to revive the company’s U.S. frozen foods business, the chief financial officer suggested the division is moving forward with a short leash.

“There is a clock on it,” said Wan Ling Martello, c.f.o. Ms. Martello made the remarks about the division March 16 in response to a question from an investment analyst at the 2015 conference of the Consumer Analyst Group of Europe, held at the Hilton London Metropole.

Ms. Martello began by offering hopeful comments about the U.S. business, which includes brands such as Hot Pockets, Lean Cuisine, DiGiorno and Stouffer’s.

“As you know, we don’t manage our business on a quarterly basis,” he said. “But we did see an uptake and an improvement in the last few months. Having said that, we recognize, and we were very clear in our last earnings call, our big business in the U.S. being frozen food was a challenge and that our expectation is that that business along with our other opportunity, our categories in China, will improve and gain traction as the year goes in 2015. And so, in the U.S., in answer to your question, is we're cautiously optimistic. Where we have a problem is it's a bit self-inflicted, and that should slowly come back during the year.”

Over the course of the presentation, Luis Cantarell, who heads the Nestle Zone EMENA (Euorpe, Middle East and North Africa), said Nestle has shown a commitment to divest businesses in recent years when necessary. Specifically, he mentioned to 2006 decision to sell Jenny Craig, a moved he called “very painful,” and more recently the sale of the PowerBar business to Post Holdings.

Ms. Martello said divestiture is not the first choice for a struggling business at Nestle.

“When we talk about managing the portfolio; most people go directly to ‘Well, are you divesting?’ It’s not just divesting, it's fixing and, during the last two weeks, a roadshow, I’ve been challenged by some investors about, ‘Well, what are you doing with the U.S. frozen?’ And I said, ‘Look, we’re obviously giving our local team a chance to fix it, but there is clock on it and so now you and I can debate whether how long should that clock be but there is a clock.’”

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READER COMMENTS (1)

By Thomas F Quinn 3/20/2015 2:35:28 PM
Having spent my work life in the frozen food industry , one truism is that it is easy to divest and harder to fix because the corporate philosophy usually precludes taking risks in fixing while divesting takes so little thought. If Nestle wants to be a player then the magic is product quality ; creative positioning ; product innovation; committed workforce and leadership.