Nestlé has initiated a strategic review of its vitamins, minerals and supplements (VMS) division even as the group posted better-than-expected organic sales growth of 2.9 percent in the first half of 2025. The move, which puts several mainstream and value-focused brands under scrutiny for potential divestment, comes amid mounting investor pressure on CEO Laurent Freixe to sharpen the company’s growth profile and refocus resources on higher-margin segments. While the Swiss food and beverage giant reaffirmed its full‑year outlook, the decision to reassess its VMS portfolio underscores deeper challenges within the health‑science arm and reflects a broader push to streamline operations in the face of changing consumer dynamics.
Nestlé’s total reported sales dipped 1.8 percent to CHF 44.2 billion in H1, weighed down by currency headwinds from a strengthened Swiss franc and uneven demand across key markets. Yet the organic growth figure narrowly outpaced analyst estimates, buoyed by price increases averaging 2.7 percent and resilient performance in coffee, pet care and premium water brands. Despite this, the VMS unit—part of the Nutrition and Health Science division that accounts for roughly 16 percent of group sales—recorded a decline in real internal growth, pointing to softer volume demand in a category that the company had once earmarked for expansion.
Strategic Realignment Targets Underperformers
The core of Nestlé’s review focuses on its mainstream and value-oriented vitamin labels, including Nature’s Bounty, Osteo Bi‑Flex, Puritan’s Pride and private‑label products in the United States. These brands, acquired through the 2021 purchase of The Bountiful Company, have struggled to maintain momentum amid intensifying competition from digitally‑native supplement startups and retailers’ own health ranges. Margins in the value segment have been under pressure as raw material costs remain elevated and promotional activity escalates. Company insiders note that the VMS unit’s operating profits have lagged behind other Nutrition and Health Science categories, prompting management to consider spin‑offs or sales of those labels by 2026. This brand rationalization effort is designed to free up capital and management bandwidth for higher‑growth opportunities.
While mainstream brands face the chopping block, Nestlé plans to double down on its premium VMS offerings, such as Garden of Life, Solgar and emerging plant‑based supplements. Freixe has emphasized that the highest growth potential lies at the upper end of the market, where consumers are willing to pay a premium for clinically validated formulations and traceable sourcing. However, integration of the Bountiful acquisition has proven more complex than anticipated. Operational synergies have been slower to materialize, with overlapping manufacturing footprints and disparate e‑commerce channels creating inefficiencies. By streamlining its import, packaging and distribution networks—particularly in North America—Nestlé aims to improve margins and accelerate innovation in areas like personalized nutrition and immune‑support supplements.
Macro Pressures and Governance Shake‑Up
Nestlé’s decision also reflects external pressures. Global economic headwinds, including residual consumer belt‑tightening and cautious spending on discretionary health products, have tempered growth forecasts for the supplement market. Rising interest rates have increased financing costs for inventory buildup and promotional programs, while currency volatility has chipped away at reported results. Additionally, a recent governance transition has added urgency to the strategic review. Paul Bulcke’s upcoming departure as chairman has fueled investor scrutiny of the company’s leadership continuity and capital allocation choices. Activist shareholders have argued that pruning underperforming divisions could unlock shareholder value and redirect investment toward faster‑growing segments like pet nutrition, coffee and infant formula.
Despite the review’s disruptive potential, Nestlé insists that it will maintain its 2025 guidance for mid‑single‑digit organic sales growth and an underlying trading operating profit margin of at least 16 percent. In a conference call, Freixe highlighted that the strategic realignment in VMS is part of a broader, multi‑year transformation roadmap launched upon his appointment in September 2024. This plan includes a CHF 2.8 billion cost‑efficiency program, accelerated divestment of non‑core assets—such as the spin‑off of the European bottled‑water unit—and targeted reinvestment in high‑return marketing and R&D initiatives.
Consumer Trends and Competitive Pressures
Consumer preferences in the wellness space have shifted rapidly toward niche, direct‑to‑consumer brands that leverage social media and influencer partnerships—areas where Nestlé’s legacy VMS labels have struggled to keep pace. Startups offering personalized vitamin subscriptions and clinically backed formulations have captured consumer imagination, leaving older brands looking stale by comparison. Retailers, meanwhile, have expanded their own private‑label supplement lines, often priced significantly below national brands. Nestlé’s mainstream VMS business has seen supermarket shelf‑share erode accordingly. By offloading underperforming labels, the company aims to reallocate marketing spend to premium channels and digital platforms, enhancing brand engagement and boosting e‑commerce penetration.
Another key rationale behind the review is the drive for operational simplicity. Nestlé has been consolidating its health‑science manufacturing campuses and adopting a “factory‑of‑the‑future” model with greater automation and modular production lines. The company believes that focusing on fewer, higher‑margin brands will optimize plant utilization and reduce supply‑chain complexity. Concurrently, Nestlé is ramping up R&D investments into novel delivery formats—such as chewables, powders and liposomal encapsulation—to differentiate its premium VMS offerings. Partnerships with biotech start‑ups and academic institutions are accelerating product pipelines in areas like cognitive health, gut‑microbiome support and plant‑based protein formulations.
Investor Reaction and Market Outlook
The market’s initial reaction to the review announcement was sober: Nestlé’s share price slid to a six‑month low before stabilizing as analysts weighed the longer‑term benefits of a leaner VMS portfolio. Some investors have praised the move as overdue, noting that the broader group’s share‑price performance has lagged behind peers like Unilever and Danone since Freixe’s tenure began. A successful divestment of the identified underperformers could yield proceeds of up to USD 2 billion, according to industry estimates, providing fresh ammunition for share buybacks or reinvestment in faster‑growing categories.
Looking ahead, the success of the vitamins review will hinge on Nestlé’s ability to execute divestments swiftly, secure attractive valuations for the brands in question and redeploy capital into core growth engines. The company has set an ambitious timeline, aiming to complete brand sales and carve-outs by mid‑2026. Should these transactions achieve management’s targets, they could sharpen Nestlé’s focus on premium nutrition and accelerate value creation across its global business.
Ultimately, Nestlé’s review of its vitamins business—undertaken despite a solid first‑half performance—signals the company’s commitment to continuous portfolio optimization in a market where growth levers are shifting. By shedding lower‑margin, mass‑market brands and concentrating on high‑value, scientifically underpinned offerings, the world’s largest food and beverage producer seeks to bolster margins, capture emerging wellness trends and reinforce its position at the forefront of consumer health.
(Source:www.foodnavigator.com)
Nestlé’s total reported sales dipped 1.8 percent to CHF 44.2 billion in H1, weighed down by currency headwinds from a strengthened Swiss franc and uneven demand across key markets. Yet the organic growth figure narrowly outpaced analyst estimates, buoyed by price increases averaging 2.7 percent and resilient performance in coffee, pet care and premium water brands. Despite this, the VMS unit—part of the Nutrition and Health Science division that accounts for roughly 16 percent of group sales—recorded a decline in real internal growth, pointing to softer volume demand in a category that the company had once earmarked for expansion.
Strategic Realignment Targets Underperformers
The core of Nestlé’s review focuses on its mainstream and value-oriented vitamin labels, including Nature’s Bounty, Osteo Bi‑Flex, Puritan’s Pride and private‑label products in the United States. These brands, acquired through the 2021 purchase of The Bountiful Company, have struggled to maintain momentum amid intensifying competition from digitally‑native supplement startups and retailers’ own health ranges. Margins in the value segment have been under pressure as raw material costs remain elevated and promotional activity escalates. Company insiders note that the VMS unit’s operating profits have lagged behind other Nutrition and Health Science categories, prompting management to consider spin‑offs or sales of those labels by 2026. This brand rationalization effort is designed to free up capital and management bandwidth for higher‑growth opportunities.
While mainstream brands face the chopping block, Nestlé plans to double down on its premium VMS offerings, such as Garden of Life, Solgar and emerging plant‑based supplements. Freixe has emphasized that the highest growth potential lies at the upper end of the market, where consumers are willing to pay a premium for clinically validated formulations and traceable sourcing. However, integration of the Bountiful acquisition has proven more complex than anticipated. Operational synergies have been slower to materialize, with overlapping manufacturing footprints and disparate e‑commerce channels creating inefficiencies. By streamlining its import, packaging and distribution networks—particularly in North America—Nestlé aims to improve margins and accelerate innovation in areas like personalized nutrition and immune‑support supplements.
Macro Pressures and Governance Shake‑Up
Nestlé’s decision also reflects external pressures. Global economic headwinds, including residual consumer belt‑tightening and cautious spending on discretionary health products, have tempered growth forecasts for the supplement market. Rising interest rates have increased financing costs for inventory buildup and promotional programs, while currency volatility has chipped away at reported results. Additionally, a recent governance transition has added urgency to the strategic review. Paul Bulcke’s upcoming departure as chairman has fueled investor scrutiny of the company’s leadership continuity and capital allocation choices. Activist shareholders have argued that pruning underperforming divisions could unlock shareholder value and redirect investment toward faster‑growing segments like pet nutrition, coffee and infant formula.
Despite the review’s disruptive potential, Nestlé insists that it will maintain its 2025 guidance for mid‑single‑digit organic sales growth and an underlying trading operating profit margin of at least 16 percent. In a conference call, Freixe highlighted that the strategic realignment in VMS is part of a broader, multi‑year transformation roadmap launched upon his appointment in September 2024. This plan includes a CHF 2.8 billion cost‑efficiency program, accelerated divestment of non‑core assets—such as the spin‑off of the European bottled‑water unit—and targeted reinvestment in high‑return marketing and R&D initiatives.
Consumer Trends and Competitive Pressures
Consumer preferences in the wellness space have shifted rapidly toward niche, direct‑to‑consumer brands that leverage social media and influencer partnerships—areas where Nestlé’s legacy VMS labels have struggled to keep pace. Startups offering personalized vitamin subscriptions and clinically backed formulations have captured consumer imagination, leaving older brands looking stale by comparison. Retailers, meanwhile, have expanded their own private‑label supplement lines, often priced significantly below national brands. Nestlé’s mainstream VMS business has seen supermarket shelf‑share erode accordingly. By offloading underperforming labels, the company aims to reallocate marketing spend to premium channels and digital platforms, enhancing brand engagement and boosting e‑commerce penetration.
Another key rationale behind the review is the drive for operational simplicity. Nestlé has been consolidating its health‑science manufacturing campuses and adopting a “factory‑of‑the‑future” model with greater automation and modular production lines. The company believes that focusing on fewer, higher‑margin brands will optimize plant utilization and reduce supply‑chain complexity. Concurrently, Nestlé is ramping up R&D investments into novel delivery formats—such as chewables, powders and liposomal encapsulation—to differentiate its premium VMS offerings. Partnerships with biotech start‑ups and academic institutions are accelerating product pipelines in areas like cognitive health, gut‑microbiome support and plant‑based protein formulations.
Investor Reaction and Market Outlook
The market’s initial reaction to the review announcement was sober: Nestlé’s share price slid to a six‑month low before stabilizing as analysts weighed the longer‑term benefits of a leaner VMS portfolio. Some investors have praised the move as overdue, noting that the broader group’s share‑price performance has lagged behind peers like Unilever and Danone since Freixe’s tenure began. A successful divestment of the identified underperformers could yield proceeds of up to USD 2 billion, according to industry estimates, providing fresh ammunition for share buybacks or reinvestment in faster‑growing categories.
Looking ahead, the success of the vitamins review will hinge on Nestlé’s ability to execute divestments swiftly, secure attractive valuations for the brands in question and redeploy capital into core growth engines. The company has set an ambitious timeline, aiming to complete brand sales and carve-outs by mid‑2026. Should these transactions achieve management’s targets, they could sharpen Nestlé’s focus on premium nutrition and accelerate value creation across its global business.
Ultimately, Nestlé’s review of its vitamins business—undertaken despite a solid first‑half performance—signals the company’s commitment to continuous portfolio optimization in a market where growth levers are shifting. By shedding lower‑margin, mass‑market brands and concentrating on high‑value, scientifically underpinned offerings, the world’s largest food and beverage producer seeks to bolster margins, capture emerging wellness trends and reinforce its position at the forefront of consumer health.
(Source:www.foodnavigator.com)
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