Læs hele analysen af Nestlé her.
Investeringsanalyse, Erin Lash, 7. november 2014
As the largest packaged food and beverage firm in the world by revenue, Nestle is one of the leading players in several categories, including beverages, dairy products, confectionery, and pet care. The breadth of its product portfolio makes Nestle a core supplier to grocery stores across the world, and its distribution network is extensive. More than 20 of Nestle's brands each generate in excess of CHF 1 billion in annual sales, and the firm is particularly dominant in the bottled water category, fending off competition from beverage behemoths Coca-Cola and PepsiCo. As a result, Nestle is in a relatively strong position to negotiate with retailers for primary shelf space in stores, and we've afforded the firm a wide moat.
Even with its leading position, the firm is not content with the status quo, but continues to seek opportunities to enhance its competitive positioning. For instance, in 2012 Nestle acquired Pfizer's infant nutrition business (which generates about 85% of its sales from faster-growing emerging markets and realizes solid profitability with EBITDA margins in the mid-20s) for 5 times fiscal 2012 sales and nearly 20 times EBITDA. Despite the rich price tag, we think Nestle was all too aware of the attractiveness of this asset and sought to ensure it didn't lose out to its competitors (namely Danone and Mead Johnson). We expect Nestle will remain a consolidator in the global consumer product industry, particularly in light of its pristine balance sheet.
We're also encouraged that Nestle isn't looking to prop up growth just for the sake of it. Efforts to rationalize its product set--even after shedding 30% of its SKUs over the past two
years while at the same time bringing new products to market--are likely to continue, and should further focus resources (both personnel and financial) on the highest return opportunities (similar to actions taken by its peers). Following the announced sales of its Jenny Craig, Power Bar, Juicy Juice businesses, we wouldn't be surprised to see other underperforming businesses, like portions of the frozen food business, as next on deck to get the ax.
Bulls and Bears say
Bulls say
- Nestle's brand investments are paying off in spades. For example, KitKat is now the number 1 chocolate brand in Japan, posting quite impressive global underlying sales growth of nearly 9%.
- For investors wishing to gain broad exposure to the consumer staples industry, Nestle may be an appropriate holding.
- We’re encouraged by management’s reference to a pullback in its own promotional spending in the frozen foods category and its focus on bringing new products to market, which we think will ultimately drive profitable sales growth longer-term.
Bears say
- The tough economic climate is causing consumers around the globe to rein in spending, and this could cause a significant short-term reduction in consumers' impulse purchases of products such as chocolate.
- Foreign currency movements have turned more unfavorable over the past few months (detracting 7.5% from sales in the first nine months of fiscal 2014, which is more pronounced than the 3.7% negative hit during fiscal 2013).
- We think Nestle was forced to pay a rich premium for Pfizer's infant nutrition business or risk this valuable asset ending up in the hands of its competitors.
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