Nestlé silent as food giants make their move

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The world's largest food group, Switzerland's Nestlé, is playing its cards close to its chest, following news that the United States group, Philip Morris, is buying fellow US food group, Nabisco, for US$15 billion.

The acquisition of Nabisco will enable Philip Morris to retain its position as the world’s second largest food company after the Swiss giant, Nestlé. The agreement comes amid a wave of food industry consolidation.

Nestlé, when contacted by swissinfo, declined to make any comment on a deal done by its competitors.

Experts are paying close attention to any reaction by Nestlé, which has so far not jumped into the hunt for big acquisitions. Any purchase could have antitrust implications. Nestlé has instead been focusing on increasing profit margins through internal growth.

“We have three major world food companies now [Nestlé, Philip Morris/Nabisco and Unilever], and the danger for Nestlé is that prices will be cut by its competitors in order to increase their market share,” said Eleonore Cherraz, an analyst at Bank Leu in Geneva. “However Nestlé is still the best growing food company worldwide.”

“The deal puts Philip Morris in a tremendously strong position as it ensures Kraft’s profit growth for the next few years,” said Salomon Smith Barney analyst, Martin Feldman.

Philip Morris is the owner of Kraft Foods, while Nabsico is the maker of brands such as Oreo cookies and Grey Poupon mustard.

by Tom O’Brien