Nestle Annouces New Health-Oriented Strategy as Sales Rise

NestleNestle (NSRGY), the world's largest food company, announced a 4.1% sales increase over the past nine months, topping analysts estimates. The company celebrated the good news by unveiling a new strategy to become the world's largest nutrition, health and wellness company at a press briefing on Friday.

Probably best known for its chocolate offerings like Kit-Kat and Nesquick, the company will use its dominant brands in the areas of bottled water, adult and children's nutrition and prepared foods to fuel future growth as the world combats health epidemics connected with obesity and diabetes.

Nestle owns some of the top brands in several categories, including Poland Spring and Perrier in the water space, PowerBar and Jenny Craig brands in adult nutrition, Gerber in children's nutrition and Stouffer's, Lean Cuisine, Hot Pockets and DiGiorno in prepared foods. The company's Purina brand also dominates the pet food market.

With so many well-recognized brands, it's not surprising that the company enjoyed growth in all regions of the world and in all categories over the first nine months of 2010. Sales over the first nine months grew to 82.8 billion Swiss francs, even as the company operated in a diffilcult economic environment. Growth was fueled by advances of 11% or more in emerging markets and BRIC nations.

The strong positive performance allowed the company to confirm its full-year projections for its food and beverage businesses of 5% organic growth with an EBIT margin increase in constant currencies for 2010.

Nestle stock dropped $1.27 or 2.3% on the news in early afternoon trading Friday.

Nestle CEO Paul Bulcke said his company was positioning itself to serve the potentially $100 billion market being created for food products that help people avoid diabetes and obesity. The market in the U.S. is already taking shape, as the company said nearly 20% of children aged 6 to 11 in the U.S. are now classified as obese and rates of Type 2 diabetes are increasing. The company announced the formation of the Nestle Institute of Health and Science in September to establish a link between food and the science of good health. This could lead to changes that could make food products healthier, such as removing sugar while maintaining taste. The company is also pushing a new marketing slogan: Nestle: Good Food, Good Life.

Investors will soon determine whether the new strategy means good returns.

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