Swiss food products giant Nestle S.A. (OTC: NSRGY) has announced plans to spend up to $2 billion to cut plastic waste, but CEO Ulf Mark Schneider said in a CNBC interview on Tuesday that shareholders have nothing to worry about: The green goal initiative will be balanced with $2 billion to address consumer demands that their food products be both healthier and less damaging to the environment.
“We said right from the beginning we are going to make this earnings-neutral, so we are going to find other ways and other efficiencies in our manufacturing and supply chain to make up for this,” Schneider said. “Now, you could say those efficiencies could have been flown to the bottom line, but for a food and beverage company and a consumer packaged goods company, it’s important to stay relevant to its consumers. Consumer tastes are shifting fast. They want to know their consumer packaging is not causing environmental concerns, and so this is all about staying relevant to today’s consumer.”
For Nestle, it’s all about scaling up. Their goal is for all their packaging to be recyclable by 2025. Schneider noted that it’s not even necessarily about whether or not millennials want the company’s specific products. Consumers want healthier products, he noted, but they also want them to have less of an environmental footprint.
“People trust good brands but they want to be sure their products meet their expectations,” he said.
Nestle’s $7 billion deal with Starbucks a year and a half ago is a signature deal and another high-growth area. The company plans on growing with Starbucks over the next two years with a pipeline of new products because “we know people want to be entertained by something new every day, every year.”
Pet food is another of Nestle’s signature high-growth categories and is well-positioned to take advantage of two notable trends, Schneider said. The first involves the “premiumization” of pet food products in the Western world and “caloric conversion” in growing markets where pet food is replacing household scraps. “Both of these trends are on fire,” he said.
Plant-based food also represents a multiyear growth opportunity, and Nestle wants to be at the forefront as a core food company. The company offers a yellow-pea-based product in America and a soy-based product in Asian markets. According to Schneider, Nestle is the only company offering two unique plant-based food products to different markets to better meet local tastes. “They both taste great,” Schneider said.
Is a deal with McDonald’s coming? Schneider says he “would like to be helpful” but can’t comment on specific clients. Broadly speaking, the company is interested in working with fast-food chains.
Interestingly, because the company is committed to local manufacturing, it hasn’t seen significant disruptions as a result of the trade war between the United States and China. Nevertheless, their stance is pro-trade. “Finding a deal is better than not finding a deal,” Schneider said.
Schneider also struck a note of optimism about Brexit. Because the deal didn’t turn out to be a “hard exit,” it will be completed in a more orderly fashion, and as far as Schneider can tell, it doesn’t look to disrupt Nestle’s operations and supply chain.
Nestle placed second in FreightWaves’ inaugural Shipper of Choice Award last year. That designation is all about being a good partner, and it often goes beyond the movement of goods. The tributes come from companies that a shipper has worked with across the supply chain.
Being named a Shipper of Choice can come from things as simple as providing bathrooms and coffee for drivers, or being transparent about dwell times and minimizing detention. It also means working to improve elements of the supply chain that have a bearing on goods movement even if they aren’t specific to transport services.
Nestle has been at the forefront in such efforts as well. In June 2018, Nestle and XPO announced they would build a 638,000-square-foot distribution center in Leicestershire, U.K. that will contain a “next generation logistics environment” to test future initiatives for Nestle’s brands, combined with a “joint innovation laboratory” for XPO and Nestle technology teams. Such a project is the first of its kind for both companies. The center should open sometime in 2020.