Stockholm (NordSIP) – A group of institutional shareholders representing assets under management of almost $1.7 trillion is taking aim at the world’s largest food and beverage manufacturer in a concerted effort to reduce its reliance on unhealthy products. In a campaign supported by non-profit non-governmental organisation (NGO) ShareAction, Legal and General Investment Management (LGIM), Candriam, La Française Asset Management, Coöperatie VGZ and the Guys and St Thomas’ Foundation have filed a shareholder resolution ahead of Nestlé’s next AGM on 18 April 2024.
The Swiss-headquartered multinational stands accused of running a strategy that goes against its self-declared corporate aim: “To unlock the power of food to enhance quality of life for everyone, today and for generations to come.” In addition to the health concerns, the resolution highlights regulatory, reputational, and legal risks as well as opportunity costs that could have an adverse effect on the company’s share value over time.
The threat to long-term brand value
Nestlé is the world’s largest food and beverage company in terms of revenue from its sales in 188 countries. An independent peer-reviewed global study across seven major markets concluded that 75% of Nestlé’s food and drink sales are classed as unhealthy according to the World Health Organisation’s (WHO) Euro Nutrient Profiling Model (NPM). Faced with the costs of a growing obesity crisis, many governments are taking regulatory, fiscal, or labelling measures to curb the sales of highly processed food and drink products that are typically high in salt, sugar, and fat. Added to this regulatory risk for Nestlé is the reputational risk represented by growing consumer awareness and mass media coverage of the risks of junk food products, as well as potential longer-term litigation risk should the food industry follow the same trajectory as the Big Tobacco firms.
ShareAction began co-ordinating a collaborative engagement campaign towards Nestlé involving more than 40 investors in April 2021, following which the company agreed to set an ambitious target to sell more nutritious food and beverages. However, ShareAction claims that the targets for increased sales of healthier products simply reflect overall projected firm-wide growth rates and do not shift the balance towards better nutrition. Moreover, Nestlé is accused of a lack of transparency and methodological rigour in its internally reported data, which contrasts with third party assessments. For example, the company includes items such as vitamin supplements and coffee as healthy products, against the generally accepted recommendations of health professionals.
The shareholder resolution demands
The shareholder resolution jointly proposed by the five institutional shareholders involved in this campaign calls for an amendment to Nestlé’s Articles of Association as required under Swiss law. This will require improvements to be made in the company’s reporting on non-financial matters, which must include absolute and proportional sales figures for food and beverage according to their healthfulness as defined by a government endorsed NPM as well as timebound target for increasing the proportion of sales derived from these healthier products.
The actions recommended under the resolution stand to reduce the various risks to share value associated with Nestlé’s current strategy, while helping to address global health-related sustainability goals thanks to the company’s sheer size and global reach. ShareAction also argues that Nestlé could also reap potential competitive benefits from the long-term growth opportunities associated with the global trend towards healthier nutrition. The NGO is calling on all Nestlé shareholders to familiarise themselves with the supporting material within the Investor Briefing with a view to voting for the resolution at the company AGM on 18 April 2024.
