The Sales Of Nestle's Unhealthy Foods Represent A Third Of Its Total Revenue

When Nestle SA applied a nutritional rating test to a wide range of its products, it found that a third missed a healthy definition from an independent source.

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Considering Nestle's ambition to be the most prominent wellness food company, the findings show Nestle still has a lot of room to improve. Nestle said Tuesday that according to the Health Star Ratings system, 30% of its portfolio is considered healthy, while 35% of it is considered unhealthy.

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Among the remaining products, dog food, infant formula, and medical nutrition products were excluded from the analysis as they were designed to meet specific goals, such as aiding kidney function, which are also not considered.  

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Food companies have been under pressure to make their portfolios healthier and more transparent, especially in emerging markets, in light of obesity being a global health crisis in much of the developing world and on the rise in emerging markets. Even though the industry has yet to settle on a single scale for reporting on the nutrition of their portfolios, investors have demanded that they report on the basis of government-approved metrics instead of their own internal metrics. 

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The companies that produce big baskets of food like Kraft Heinz and Kellogg have so far resisted releasing nutrition metrics that have been independent of their companies. 

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In order to ensure its products were as healthy as possible, Nestlé resolved to use the HSR system, also known as the Health Star Rating, which is widely used in Australia and New Zealand. The HSR system ranks products based on their health-related attributes.

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Transparency is a must

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Investor campaign group ShareAction welcomed the new reports from Nestle but insisted that the company needs to improve its ranking if it wants to achieve greater transparency and institutional investors. 

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Nestle is one of the largest food and drinks companies in the world, and its influence is outsized. Holly Gabriel, a ShareAction campaigner, said that the company has a lot of power over what people eat and drink. In addition to that, what the company is still far too heavily reliant upon is the sale of less healthy foods and drinks.

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Energy, saturated fat, sugar, sodium, protein, dietary fiber, and fruit, vegetable, nut, and legume content are all taken into account when rating a product. A product like confectionery or salty sauce scores low on this scale, whereas a product such as plain coffee and water scores high, because they are low in fat, salt, and sugar.

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As a result of the increased transparency, investors are able to understand how exposed companies are to efforts to curb obesity, such as efforts to stop advertising. They are also increasingly subject to pressure to make healthier products and reformulate their products.

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Nestle does have room for improvement, but the majority of Nestle's sales, despite being pet food or products such as infant formula, or products that we consider to be relatively healthy, could not be targeted by anti-junk food legislation because these are products that meet the requirements of the legislation.

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In addition to Danone, Unilever has also set an objective that by 2028, 85% of its nutrition and ice cream servings will meet the company's own nutrition criteria. This is more ambitious than Nestle's target of 85% of the nutrition and ice cream servings meeting the company's own nutrition criteria.

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In 2021, Danone's nutrition and ice cream portfolio had an HSR rating of 3.5 stars or greater for 90% of its products by sales volume, compared with only 17% of Unilever's nutrition and ice cream portfolio achieving that level.

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A Nestle executive earlier this year told analysts that the company's reporting on nutrition will not mean that the company will abandon products like KitKats and Smarties that have been proven to be nutritionally beneficial. But the company is reformulating such products as Nesquik to contain less sugar in some markets.

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We do not want to determine how well the healthier parts of the portfolio will outperform the other parts of the portfolio based on the metric of how healthy it is, he added. We want to succeed in both areas at the same time.

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This study was conducted by Nestle to examine the revenue of 97% of the company's products, including some products that are not food or beverages as well as some acquisitions that were made recently.