Latest cost-of-living squeeze tests Nestle’s vitamins push

Bloomberg

Packaged-goods giants like Nestle SA and Unilever Plc have poured billions into acquisitions of vitamin brands in recent years, seeking growth beyond traditional businesses like stock cubes, ice cream and soap. The bet appeared to pay off when Covid hit, turbocharging demand for supplements as worried consumers sought to boost their defenses against a new and mysterious virus.
Over the past year, however, with the pandemic easing and a cost-of-living crisis squeezing household budgets, the vitamin business has fallen on harder times. In the US, supplement sales fell 3.3% by units in the year through October, following three consecutive years of growth, according to data provider NielsenIQ.
Nestle warned of a bumpy road ahead. The company’s supplement sales were flat in the first nine months of 2022, and a return to high single-digit growth isn’t expected until the second half of next year.
“Our vitamin, minerals and supplement business has seen explosive demand as we have a lot of products focusing on immunity,” said Greg Behar, chief executive officer of the health science unit, speaking at an investor meeting in Barcelona. “We see now a slight deceleration.”
The Swiss food company has spent more than $8 billion on acquisitions of brands such as Solgar and Puritan’s Pride. That’s made it the market leader in the fragmented field, with a 4% share, overtaking rivals like Reckitt Benckiser Group Plc and Procter & Gamble Co, which also have vitamins businesses. Unilever bought seven businesses since 2018, now in a division with its burgeoning luxe skincare business which has consistently brought double-digit growth.

New Areas
The dealmaking spree has come amid a broader push into new areas by the consumer giants, as they face sluggish demand for traditional food and household staples. While Nestle pet food brands like Purina have grown consistently, the group’s forays into health have been more fraught. The Swiss company put its Palforzia peanut-allergy treatment up for sale only two years after buying it.
“In terms of top-line growth, vitamins, minerals and supplements won’t be the next pet care or skincare,” Bernstein analyst Bruno Monteyne said.
Despite the recent setbacks, Nestle and others say there’s still plenty of potential in the business, and they’re looking beyond the current slowdown. The US market highlights the bullish case. Some 83% of households there take vitamins, minerals and supplements, representing about half of the global market. Health-conscious American shoppers are happy researching and self-medicating to make themselves feel better — regardless of whether there’s a real benefit or simply a placebo effect.
If people elsewhere spent anything like the $155 each American shells out annually on these products, sales growth for international brands would boom. Some supplements fetch eye-watering price: startup Lyma sells a starter kit for about £500 ($600).
Seeing vitamins and supplements as an emerging and enduring global trend, Unilever has built up a €1 billion ($1 billion) health and wellbeing unit. Earlier this year, Unilever bought hair-supplement brand Nutrafol; last year it acquired Onnit, which focuses on digestive health and memory.

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