Shareholders challenge Nestlé to lead market with healthier offerings

14 Mar 2024 --- Today, a coalition of Nestlé shareholders, with US$1.68 trillion in assets, has filed a resolution challenging the company to improve the healthfulness of its products. Nutrition Insight discusses the resolution with ShareAction, a UK-based, responsible investment NGO that is coordinating the action.

“We’ve been engaging with Nestlé through our investors for a couple of years now, and we have asked them to disclose what proportion of their sales come from healthy versus unhealthy products using a transparent nutrient profile model that’s been endorsed by any government,” says Thomas Abrams, co-head of health at ShareAction.

“We have also asked them to set an ambitious target to improve that proportion,” he continues. “After two years of engaging with the company, our investors have felt that there is little else they can do but file a shareholder resolution, which can raise this issue. Primarily, they’re concerned that Nestlé’s over-reliance on the sale of these unhealthy products, which exposes the company as well as their shareholders to a lot of different business risks.”

Shareholders are concerned that Nestlé’ is over-reliant on the sale of unhealthy products, exposing the company and shareholders to business risks.Shareholders’ asks
The coalition of investors includes Legal and General Investment Management, Candriam, and La Francaise Asset Management. The entities will support the resolution set to be voted on at Nestlé’s Annual General Meeting, which will be held on 18th April.

“The investors that we’re working with on this shareholder resolution believe that there are opportunities for their companies and for Nestlé if they embrace what customers are increasingly asking for, which is to sell healthier products,” Abrams asserts.

“We see time and time again, in consumer surveys, that the public does want to eat healthier options, they just don’t have access to them. If Nestlé agrees to shift their sales toward healthier products, this will mean that they will have a sustainable business model for the long term that actually protects people’s health.”

“We are seeing consumers increasingly demand healthier products, but also increasingly scrutinizing companies who don’t follow through on their word on their commitment toward ESG or health,” Abrams explains. “Potential employees and workers for these companies are also increasingly asking to work in companies that align with their values.”

Reputational risk
Abrams highlights shareholders’ fears concerning the regulatory, reputational and legal risks to the company and public health stemming from its overreliance on unhealthy sales. He asserts that companies, in particular food and beverage manufacturers, play a significant role in public health.

“Countries around the world are dealing with fast-increasing public health care costs,” he states. “The cost of poor health in economies is also increasing significantly — a lot of governments are bringing in new regulations to try to reduce the negative impact that certain companies have on people’s health.”

“We know now that there are more than 50 different types of sugary or unhealthy food taxes that have been brought in around the world, and we’re expecting there’s going to be more of these in more and more markets, and they’re going to have to get stronger because governments are not going to be able to cope with the spiraling cost of health care without those taxes.”

Abrams explains that the unhealthy food that such companies are selling creates costs for governments, while these companies’ shareholders often play a major role in the economies of the countries in question.

“They’re going to not be able to keep on externalizing those costs forever, so our investors are trying to encourage companies to think ahead of some of these regulations and regulatory risks and to start relying on a business model that prioritizes the sale of healthier food.”

“Nestlé, as the biggest food and beverage manufacturer in the world, is certainly quite exposed to these risks,” he emphasizes.

The power to make a change
Discussing the potential risks for Nestlé of transitioning away from some of the confectionery products they are best known for, Abrams points to the size of the company and its capacity to take on a leadership role in the food and beverage space.

As the world's largest food and beverage company, Nestlé has the power build consumer demand for healthier food.“Nestlé is the biggest food and beverage manufacturer in the world — they have the power to really change the shape of the market and build consumer demand for healthier food,” Abrams underscores. “We need to see a transition in the environment toward an economy where people are able to access and eat things that are good for them and make them healthy for longer.”

“If Nestlé wants to be a leader, their shareholders are asking them to put their deeds where their words are and see if they can follow through with some real action,” he concludes “Nestlé and its peers have been very successful for years in building and growing a market for unhealthy foods. Now we’re asking to see if they can do that for healthy foods.”

In September of 2023, Nestlé made a commitment to sell more nutritious products by 2030. According to Abrams, this does not go far enough to address the issues brought up by the shareholders.

“The target that they released last September came after a significant engagement with the shareholders in our coalition, but many are still not satisfied with that target. One of the problems with it is that it is an absolute target, which says that they’re going to try to sell more healthy food,” he elaborates.

“It makes no commitment regarding the unhealthy foods, that are what really causes the negative health impact. So really, the sales of unhealthy food could increase at a faster rate even than those healthy foods. There is no commitment on that.”

Abrams also states that in the past Nestlé has promised it is going to make an ambitious target to sell more healthy food.

“But it seems that the target that they came out with is actually pretty much in line with the growth that they’re expecting for the organization as a whole over the next six or so years,” he concludes.

By Milana Nikolova

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