NESTLÉ is not easily rattled, to some investors’ chagrin. The world’s biggest food company accounts for about half of all sales of instant coffee, not to mention one quarter of grub for babies, dogs and cats. Thirty-four of its brands, including KitKat and Nespresso, earn over $1bn each. Yet many investors complain that Nestlé is falling behind, and this week Daniel Loeb, an American activist investor who runs Third Point, a hedge fund, gave voice to their concerns. On June 25th, in a letter, he attacked Nestlé’s “staid culture and tendency towards incrementalism”.

Third Point has acquired a small stake in Nestlé, less than 2% of the company. But it was enough to spark a jump of over 4% in the company’s share price on hopes that its bosses would respond. On June 27th Nestlé announced its own menu of changes—all unrelated, the company claimed, to the urging of any individual investor. Third Point will keep pushing for more.

The skirmish points to a basic question facing not just Nestlé but many of its peers: how should a consumer-goods giant operate? Big brands can no longer assert their dominance by securing spots on store shelves and spending millions on television ads. Now they must also succeed online and meet demand for “healthy” and “natural” fare. In rich countries, in particular, large companies are squeezed on one side...Continue reading