Nestlé is a household name, leaving people who hear it to think of their product lines of baby food, bottle water, breakfast cereals, coffees, confectionery, dairy products, ice cream, pet foods and snacks. Nestlé brands included in the $1.1 billion dollar company include Nespresso, Nescafé, Kit Kat, Smarties, Nesquick, Stouffer’s, Vittel and Maggi.
Nestlé was formed in 1905 by the merger of the Anglo-Swiss Milk Company, which had been established in 1866 by brothers George and Charles Page, and Farine Lactée Henri Nestlé, also founded in 1866 by Henri Nestlé. Since the early 20th century, although always famous for its dairy products, the company began to expand its offerings. A trend that continues to this day with the recent shifting and expansion of the company’s portfolio.
On February 11th, Nestlé announced its move into the skin care industry with the launch of a new dermatology business following its buyout of Galerma, its joint venture with one of its largest shareholders, L’Oreal, the world’s largest cosmetics company. The company purchased a 50 percent stake in the Swiss-based Galderma pharmaceutical company which has specialized in the research, development and marketing of dermatological treatments since it was formed by both companies in 1981.
Nestlé announced on Tuesday that it has agreed to trade a large portion of its stake in L’Oreal for complete control of the skin care joint venture valued at €6.5 billion ($8.87 billion). Picking up full control in Galderma, the French cosmetics giant will buy back 48.5 million of its own shares from Nestlé.
Nestlé chairman Peter Brabeck-Letmathe said the deal did not mean the company was abandoning its involvement in L’Oreal. “Nestlé will continue to support the development of L’Oreal as in the past 40 years,” he said.
Nestlé is striving to reposition its food-and-beverage business more into the nutrition and wellness fields. Galderma’s business fits well into that new model.
Nestlé will greatly increase Galderma’s current portfolio, formulations and innovative research. Galderma’s scientific division will become part of Nestlé Skin Health and will work together with Nestlé’s global research network, while 33 of the of the company’s commercial subsidiaries acquired in the deal will continue to operate under the Galderma brand.
Humberto Antunes, Chief Executive Officer of Galderma, shared with reporters: “As part of Nestlé Skin Health, Galderma’s medical heritage and portfolio can be expanded to meet the full range of skin health needs, creating a new world leader focused on improving people’s lives.”
Galderma has always provided a range of products used to treat a variety of skin conditions, including acne, psoriasis and cancer, while selling in more than 70 countries. But 2013 was not an easy year for Galderma, forcing Nestlé to plan accordingly for the challenges ahead. From Nestlé’s point of view, the benefits outweigh the negative.
“Skin care has high margins and strong growth potential,” said Oru Mohiuddin, an analyst at Euromonitor International in London. The latest push by Nestlé into the skin and health care sector promises faster growth and wider profit that the Swiss company’s main food based production line.”
