On Monday 23rd April, it emerged that Pfizer, the world’s largest pharmaceutical company, had sold its infant formula business to Nestlé, the Swiss food group giant, in a deal worth $11.85 billion (€9 billion). The deal illustrates a strategic opportunity for Nestlé to strengthen its global footprint in infant nutrition, especially following its successful integration of a large-scale infant and clinical nutrition business, which it acquired from pharma group Novartis AG (AA-/Stable/A-1+) in 2007. Having tested the waters with infant nutrition after buying what subsequently became Pfizer Nutrition from Wyeth, this latest move also apparently affords Pfizer to dedicate resources to its core pharmaceuticals business…Lucky us…!
Nestlé’s (infant) formula for success
The Pfizer business ranks as world number five in the infant milk formula market after Nestlé itself, Mead Johnson, Danone (Nestlé’s opposition in the bidding war for the business) and Abbott Laboratories. So it seems that Nestlé is simply buying off the weakest of the competition. Analysts envisage that Nestle may face antitrust issues and be forced to sell off some of its businesses in some countries.
Nestlé certainly has its eye on the money, and it seems that expansion into the lucrative Chinese market is their best strategy of avoiding antitrust issues. But Nestlé’s share of the lucrative infant nutrition market has been shrinking – something that the Pfizer buy-out immediately corrects, given that Pfizer Nutrition’s market share was 85% in such emerging markets.
Breast is best!
Our concern, however, is that Nestlé’s infant nutrition products will continue to act as an obstruction for breast milk, the most important nutrition young humans receive. In this area, Nestlé has a deeply soiled track record that was only improved following heavy campaigning and the Nestlé boycott, starting in the 1970s.
Only time will tell if the leopard has changed its spots.