Given most U.S. consumers think of candy bars when they think of the Nestle brand, the road ahead for the new unit is likely to be a long and bumpy one. Nestle Nutrition will focus on aggressively growing PowerBar, Carnation Instant Breakfast and Good Start infant-formula brands.
The unit's formation follows Nestle's move last May to develop a global nutrition organization as envisioned by Mr. Brabeck. The effort is certainly a crucial one, given the rising clamor over obesity, but while analysts agree that major R&D investments are being made to forward that goal, current sales for the brands Nestle is banking on to carry the nutrition torch in the U.S. more than suggest it won't happen overnight.
GETTING IN THE GAME
"The nutrition game is one Nestle wants to play in, even if they're in the first inning," said Prudential Securities analyst John McMillin. The creation of the new business, he said, "reflects that [Mr.] Brabeck has made health and nutrition a global priority because he feels that one of Nestle's competitive strengths is research and development, and he's looking for brands like PowerBar to expand even further in the years ahead." Hopefully, Mr. McMillin said, "there is the innovation in the pipeline to make it work."
A Nestle spokeswoman declined to comment.
Although PowerBar marketing will still be housed at the standalone division's original Berkeley, Calif., headquarters, Nestle's aggressive plan to grow the business by $21 million this year includes handing over sales of PowerBar in key national retail accounts, formerly handled by independent brokers, to the Nestle sales team. New nutrition-focused sales executives assigned to Nestle's top 10 accounts as part of Nestle Nutrition are pitching a mainstream, better-tasting bar called Triple Threat and a Complete Nutrition line of shakes and bars for PowerBar's women-targeted Pria brand, both of which will be heavily supported, according to an executive close to Nestle.
In the five years since Nestle acquired the upstart energy-bar brand with double-digit growth and more than $100 million in sales, PowerBar has barely been able to tread water against a continued onslaught of competition. Sales in 2002 grew 22% to $87 million in food, drug and mass retailers excluding Wal-Mart.
This year, for the 52 weeks ended Feb. 20 in those same outlets, sales fell 3.8% to $82 million according to Information Resources Inc. And despite a new low-carb line and a renewed advertising thrust last year for Carnation Instant Breakfast, the brand grew just 2% during that same Feb. 20 time period, compared to the $58 million in sales it had back in 2003.
Newly branded Good Start (formerly Carnation), Nestle's powdered-infant-formula business, did gain some traction over the last year, with sales up 28% to $216 million largely due to the launch of nutritionally enhanced Good Start Supreme, but Nestle still ranks a distant third, behind Mead-Johnson's Enfamil and Ross Laboratories' Similac.
less `power' spending
Nestle has steadily decreased its media spending on PowerBar since it acquired the company, going from an expenditure of $20 million in 2000 to a mere $6.5 million last year, according to TNS Media Intelligence. This year, Nestle plans to spend $18 million on the new Pria items alone, $15 million of that on a TV effort bowing in July from Publicis Groupe's Publicis, Dallas.
Triple Threat, launching this spring in varieties including Chocolate Caramel Fusion and Chocolate Peanut Butter Crisp, is aimed at consumers who previously eschewed poor-tasting performance energy bars with something that tastes more like a candy bar, the executive said. But competition for that space is coming on fast. Masterfoods USA in 2003 launched Snickers Marathon bar and Hershey Foods has recently unveiled its own SmartZone bars.
Pria, which was launched in 2001, has only grown to $22 million in sales, according to the data IRI provides the media, which does not include convenience stores, health-food channels or Wal-Mart. Nestle hopes to use the influx of media to increase awareness of the brand among active, busy women 25 to 49 as a good source of nutrition.
While no new product innovation has yet to be unveiled for Carnation Instant Breakfast or infant formula, Nestle's new unit is likely working on it. And when it comes, major media support is sure to follow. Nestle ramped up spending last year on its Good Start Supreme to $27 million up from only $11 million in 2003, according to TNS.
On a mission
Nestle CEO Peter Brabeck
Goal: Make nutrition, already a global priority, one in the U.S. as well.
Strategy: A standalone unit to buoy brands such as PowerBar, Carnation Instant Breakfast and Good Start infant formula with investments in R&D, additional sales-force attention and media.
Odds: Though analysts are hopeful that the deep-pocketed food behemoth will indeed innovate, current sales and fierce competition work against its favor.