Nestlé

FAIRR Commentary

• Nestle’s segments (milk products and ice-cream, nutrition and health science, prepared dishes and cooking aids, confectionary, petcare, powdered and liquid beverages) which total nearly 92% of the company’s revenue could be exposed to animal-based ingredients.
• In terms of procurement, the company estimates the split between animal and plant-protein sources to be 52% vs 48% respectively, including their pet food business.
• Nearly 92% of Nestlé’s revenues is partially or wholly reliant on animal proteins. While the company sources all types of animal proteins, its biggest exposure is to dairy, with 20-40% of revenues dependent on the commodity (based on CDP disclosures). The company’s biggest single market is the US (c.30% of revenues), but over three-quarters of the company’s revenues come from other regions of the world including Asia and Latin America. Protein diversification is a material issue for the company, given its exposure to animal proteins and the geographical diversity of its business.
• Nestlé has seized the commercial opportunities in the highly competitive plant-based burger market. They have developed plant-based burgers as part of their long-standing Garden Gourmet brand in Europe and their newly acquired Sweet Earth brand in the US. Other Nestlé brands have also developed plant-based product choices. The company has an active research programme on the issue of alternative proteins. They are also addressing the impacts of their animal sourcing through clear requirements for livestock suppliers.
• However, the company has been reluctant to explicitly acknowledge the materiality of this issue for their business so far. They are tracking information internally but have not yet developed targets or metrics that can help them undertake a portfolio transition. Further, their work is centred in their US and European markets, and it is unclear how this will play out in other markets such as China, India and Latin America.
• Nestle’s consumer engagement is ad-hoc – it is unclear how their marketing on plant-based brands compares with that of their other brands (for example, in terms of spend).
• We would encourage the company to build a more strategic plan to transition its product portfolio (through, for example, brand/business segment targets) to ensure any exposure to animal proteins is in line with a low-carbon strategy.

Company Comment

The company responded to FAIRR and provided feedback on individual sections.