The NYC-based head fund of Third Point, founded by American investor Daniel Loeb has revealed that it has a 1% stake in Switzerland's Nestlé. The 3.28 billion Swiss francs (3.4 billion in U.S. dollars) stake is the largest by a hedge fund, making Third Point the eighth largest shareholder in the food and drink company.
Although Nestlé is a big player, if not the biggest in the packaged foods industry, the company has been struggling to adapt to new consumer tastes and to compete with smaller innovative and often local brands.
Third Point wrote a letter to investors this week outlining some of the challenges that Nestlé is facing and some recommendations for the company to thrive better in today's market.
"However, despite having arguably the best positioned portfolio in the consumer packaged goods industry, Nestlé shares have significantly underperformed most of their US and European consumer staples peers on a three year, five year, and ten year total shareholder return basis. One year returns have been driven largely by the market’s anticipation that with a newly appointed CEO, Nestlé will improve," wrote Third Point in the letter to investors.
Mark Schneider, the company's new chief executive, was brought on the management team to shake things up.
"We feel strongly that in order to succeed, Dr. Schneider will need to articulate a decisive and bold action plan that addresses the staid culture and tendency towards incrementalism that has typified the company’s prior leadership and resulted in its long-term underperformance," wrote Third Point in the letter to investors.
The hedge fund recommended that the company sell the L'Oreal stake to gain capital and buy back stock, along with several other suggestions to stimulate growth.
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