NSRGY Nestle SA (PK)

Purchase of Canada's Atrium Innovations comes as sales slow in the food business

By Ben Dummett and Saabira Chaudhuri 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 6, 2017).

LONDON -- Nestlé SA agreed to buy Atrium Innovations Inc., a Canadian vitamin maker, for $2.3 billion, including the assumption of debt -- expanding its range of consumer-health offerings as sales slow for packaged-food staples such as TV dinners and chocolate-powdered drinks.

Atrium owns the Garden of Life and Pure Encapsulations supplement brands and is owned by a consortium of investors led by private-equity firm Permira. It will become part of Nestlé's health-sciences arm, which makes products such as meal-replacement drinks and nutritional therapies for conditions such as diabetes and dysphagia.

That unit had sales of $15.2 billion last year, up 2% from the previous year. Nestlé's overall sales last year were about $90 billion, most of that from businesses such as coffee, bottled water, frozen food and candy bars.

Packaged-food makers such as Nestlé and Kraft Heinz Co. are being buffeted by a number of forces. Fast-changing consumer tastes have shoppers fleeing some of these companies' big brands in favor of healthier options or locally or more naturally made goods.

Social media and e-commerce has leveled the playing field for some of these small new competitors -- making the big companies' research-and-development and marketing budgets less effective in holding on to market share.

Earlier this year, Nestlé abandoned its long-held annual sales-growth targets after years of missing them. A few months later, activist investor Daniel Loeb took a $3.5 billion stake in Nestlé, which makes Nescafe, Lean Cuisine and Nesquik, and demanded big change.

In response, Nestlé Chief Executive Mark Schneider has rolled out share buybacks and a formal profit-margin target. He also has said he is willing to shuffle 10% of the company's portfolio. In June, Nestlé put its North American chocolate business up for sale. The unit could bring in $3 billion, according to analysts.

But mostly, Nestlé has focused on small acquisitions and stake purchases since Mr. Schneider, a former health-care executive, took over in January. The Vevey, Switzerland-based company in recent months bought artisan coffee maker Blue Bottle, cold-brew coffee brand Chameleon, and plant-based frozen foods maker Sweet Earth. It took a stake in subscription meal-delivery company Freshly.

Greg Behar, Nestlé's head of health science, said buying Atrium would allow Nestlé to extend its product range in areas such as probiotics, plant-based protein nutrition, meal replacements and multivitamins, including non-GMO, organic and natural supplements. The Wall Street Journal first reported Nestlé's plans to buy Atrium earlier Tuesday.

Montreal-based Atrium employs about 1,400 people. Its brands -- which also include the Wobenzym and Minami supplements -- are distributed across more than 50 countries. Four years ago, Permira said it was buying 75% of Atrium for about 563 million Canadian dollars, or roughly US$444 million.

The selling consortium also included a group of Quebec-based funds, including the pension fund Caisse de dépôt et placement du Québec.

Write to Ben Dummett at ben.dummett@wsj.com and Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

December 06, 2017 02:47 ET (07:47 GMT)

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