Big Food Companies Are Rethinking Portfolios as Sales Fall. Nestlé Is the Latest.

Nestlé said it might sell some of its vitamins brands, including Nature’s Bounty. (Dreamstime)

Nestlé said it might sell some of its vitamins brands, including Nature’s Bounty, as it seeks more growth in a challenging consumer environment. It isn’t the only one.

Nestlé CEO Laurent Freixe said Thursday the firm was launching a review of underperforming mainstream and value brands in its vitamins, minerals, and supplements unit, which might result in the divestment of these brands.

Packaged-food companies are increasingly evaluating their portfolios to focus on better-performing businesses amid falling sales.

Nestlé bought Nature’s Bounty, Osteo Bi-Flex, and Puritan’s Pride in 2021 in a major move to push into the nutritional supplements market. But the business has been struggling.

With the review and potential divestiture, the consumer-goods conglomerate said it would focus more on premium supplement brands like Garden of Life and Solgar, where it has a “distinct competitive edge” through scientific research, innovation, and brand-building.

Nestlé said it’s also making a strategic evaluation of its water business, which includes brands like Perrier and San Pellegrino. The company already sold its North America water business, home to brands like Pure Life and Poland Spring, in 2021.

Inflation-driven price increases and tariff concerns have pushed consumers to shop less, while weight-loss drugs have further reduced some Americans’ calorie intake. Those forces have led many food companies to reshape their portfolios.

Earlier this month, Italian chocolate maker Ferrero said it would acquire cereal maker WK Kellogg —the spinoff from the former Kellogg company—for a total enterprise value of $3.1 billion. This came after candy giant Mars announced its intent to buy Kellanova, the other part of Kellogg that focuses on snacks, for $36 billion.

Big food companies are scrambling to acquire popular emerging brands—often in healthy and wellness foods—to get their foot in new and fast-growing categories. Earlier this year, PepsiCo bought Mexican‑inspired gluten-free snack maker Siete Foods and prebiotic soda brand Poppi, while energy-drink company Celsius completed the acquisition of its smaller rival Alani Nutrition.

While acquisitions can often be a solution to refuel growth, companies must follow consumers’ changing preferences closely and approach such deals carefully.

Last year, Campbell’s acquisition of Sovos Brand—the company behind the premium pasta sauce brand Rao’s—has boosted revenue growth and strengthened Campbell’s position in the premium meals segment. By contrast, J.M. Smucker’s purchase of Hostess Brands, which makes sweet baked snacks like Twinkies, has dragged on sales and led to millions of dollars of write-downs in intangible asset value.

Companies aren’t just expanding—they are also shedding underperforming units to focus more on their core business or high-margin brands.

In 2024, General Mills sold its North American yogurt business, including brands like Yoplait and Go-Gurt, as it struggled to compete with Greek yogurt brands like Chobani and private-label and nondairy alternatives. Unilever is spinning off ice cream brands, including Ben & Jerry’s and Magnum, to focus more on its other brands like Lipton tea and Hellmann’s mayonnaise.

This month, The Wall Street Journal reported that Kraft Heinz is considering spinning off part of its grocery operation into a business valued at as much as $20 billion, while the rest of the company focuses more on sauces and spreads such as its namesake Heinz ketchup. Kraft Heinz didn’t confirm the report, but noted that it has been “evaluating potential strategic transactions to unlock shareholder value.”

Earlier this month, Kraft Heinz also agreed to sell its Italian baby food and specialty food businesses.

Write to Evie Liu at evie.liu@barrons.com