Activist investors urge KitKat maker Nestlé to reduce reliance on sugar, fat and salt
A resolution filed by a group of Nestlé shareholders will go to vote today at its AGM, demanding one of the world’s biggest food makers reduces its reliance on products with high levels of sugar, fat and salts.
The resolution was co-filed last month by five institutional investors with $1.68tn (£1.35tn) in assets under management, including Legal and General Investment Management, one of Europe’s largest asset managers.
Coordinated by responsible investment charity ShareAction, shareholders have put forward a resolution to the maker of KitKat and Quality Street that aims to move the company away from over-reliance on unhealthy products to healthier eating options.
They argue that Nestlé, alongside other large food manufacturers, “risk missing the opportunity to meet growing consumer demand for more healthy products and face increasing regulatory pressure from governments legislating to tackle the rising costs of poor health”.
Holly Gabriel, registered nutritionist and consumer health lead at ShareAction, who will attend the AGM on Thursday, said: “While Nestlé made assurances that it would set an ambitious target to improve its healthier food offering, the target it released in September last year was inadequate.
“It gives investors no reassurance that sales won’t continue to jeopardise public health and expose the company to so much unnecessary risk. The trends that have led to shareholders filing this resolution are not going away, and in fact data suggests they are going to get worse.”
She added: “Nestlé must respond to these concerns and set a target that increases the share of healthier food it sells, which would also help the company meet its own commitment to contribute to a healthier future.”
Some 70 percent of Nestlé sales in the UK are from foods that are high in fat, salt and sugar, according to new research by Oxford University and BiteBack.
The Swiss listed business, which has a market capitalisation of £211bn, is the maker of a number of sweet brands such as Haagen Daz ice cream and Yorkie chocolate bars.
Commenting last month, Maria Larsson Ortino, senior global ESG manager at Legal & General Investment Management (LGIM) said: “There is a clear link between a poor diet and chronic health conditions, such as obesity, heart disease and diabetes.
“As a long-term investor, LGIM believes that healthcare costs and decreased productivity have significant negative consequences on our clients’ assets across multiple sectors.”
Nestle uses the widely used Health Star Rating (HSR) system as the basis for transparently reporting nutritional values.
Products with a (HSR) of 3.5 stars or more – together with specialised nutrition products, such as baby foods, vitamin and mineral supplements, and medical nutrition – are considered nutritious.
Together, these products accounted for close to 59 per cent of Nestle food and beverage sales, according to Nestle’s 2023 annual report.
Thomas Abrams of ShareAction, told City A.M: “The resolution has been put to all Nestle’s shareholders and the result of the vote will be announced at the AGM. Investors including Legal and General Investment Management, Candriam, and La Francaise Asset Management, co-filed the resolution.
“While we can’t estimate the support we will get, we do know that several big investors are supporting this critical resolution As this is the first resolution of its type to go to a vote, many more are having to start considering how health affects their investments.”
He added: “As the health trends that spurred this resolution will worsen if left unaddressed, we expect that we will see increasing investor support for these types of resolutions in future.”
A Nestlé’s spokesperson, said: “While we share the common goal of increasing the availability of more nutritious foods for consumers around the world, we disagree with the idea of deliberately limiting growth in specific areas of our portfolio, as this would create opportunities for competitors without yielding public health benefits.
“ShareAction is targeting the wrong company and using figures that suit them. We now offer a diversified range of products: for example, 50 per cent of our sales now come from coffee, petcare and Nestlé Health Science products. Ten years ago, this figure was 30 per cent.
They added: We are moving. More would be accomplished by asking other food and beverage companies to do the same. What is needed are efforts to help move the whole industry towards greater transparency with targets to grow the sales of more nutritious foods.
“Such a sales target has no place in a company’s articles of association. Such an article would restrict Nestlé’s strategic freedom and limit management’s ability to make responsible decisions.
“We have been working for many years to evolve our portfolio, reformulate our products and innovate. At the same time, we have been strengthening our responsible marketing practices.”