The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Aimee Donnellan
DUBLIN, July 21 (Reuters Breakingviews) - It's part of the job description for a consumer-goods CEO to spot trends early. The unmissable one in the sector right now is a wave of corporate breakups: Unilever ULVR.L is doing one, as is Keurig Dr Pepper KDP.O, while Kraft Heinz KHC.O considered it. One big question on bankers' and analysts' minds, therefore, is whether Nestlé NESN.S, the $274 billion KitKat-to-kibble conglomerate, will persist in its current sprawling form. The answer is probably yes - and with good reason.
The Swiss behemoth's boardroom has just emerged from a volatile period. CEO Philipp Navratil took over last September as the third boss in five years. He inherited stagnating sales volumes, competition from supermarket own-brand goods, and the threat of GLP-1 drugs eating into snack demand. Just ahead of his appointment, Nestlé traded at around 13 times expected EBITDA, its lowest valuation multiple since well before the pandemic.
It's no surprise, then, that the breakup question has been hanging over the company of late, particularly since rivals' corporate machinations accelerated. In February, one analyst asked Navratil whether Nestlé was "too big". The company has 2,000 brands and spans nearly 200 countries. It straddles everything from Nescafé coffee, Purina pet food, Aero chocolate bars, Sanpellegrino sparkling water and so-called nutrition offerings like Gerber baby food. Analysts expect $110 billion of revenue this year, which is slightly more than Unilever, Reckitt Benckiser RKT.L and Danone DANO.PA combined.
Navratil, responding to the analyst's "too big" question, defended Nestlé's scale, arguing that it gives the group greater clout in negotiations with stores. It helps that investors seem on board with his vision, at least in relative terms. The company now trades at nearly 15 times expected EBITDA, which represents a premium to Unilever's multiple of 12.
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