In late September the press echoed the creation of a new Nestle subsidiary - "Health Sciences". This division will initially encompass infant nutrition (Gerber), and also Jenny Craig, a rival of Weight Watchers. Nestle announced that it will grow well beyond this: "We are going to acquire licenses, purchase patents, create partnerships with start-ups to create a very open scientific environment that is fertile..." A research centre, the Nestlé Institute of Health Sciences, will complete the configuration.
Peter Brabeck-Lamarthe states: “The combination of health economics, changing demographics and advances in health science show that our existing healthcare systems, which focus on treating sick people, are not sustainable and need redesigning. Nestlé has the expertise, the science, the resources and the organisation to play a major role in seeking alternative solutions. Personalised health science nutrition is about finding efficient and cost effective ways to prevent and treat acute and chronic diseases in the 21st century”.
Why has there been such a major shift?
I think the reason can be found in a strategic rethink which can be summed up in 4 points:
- Under pressure, because of longer life expectancy, healthcare has become a major concern all over the world: All countries, faced with the burden of healthcare expenditure, place the onus for their health on citizens / consumers. We see the emergence of a global mega-trend - which is gradually mutating into a new social norm: the health responsibility.
- Economic actors (like Nestlé) that wish to position themselves in the health sector are now facing two markets with very different characteristics:
"Food": a market where are relatively few barriers to entry (this is the role of brands), marketing products that are not sophisticated with relatively slow growth - a market where "health" and "nutrition" claims are increasingly controlled.
Pharmacy: a market that is highly restricted (investment in R & D and authorizations before market launch), selling sophisticated products, with low success rates and under pressure to lower prices by the government and generic manufacturers.
- There is a third market that could meet the demand for health: according to FoodBev.com, one that Peter Brabeck called the "Disease Modifying Nutritionals". In other words, "medical foods", that can offer consumers customized solutions to their health problems: it consists of adding ingredients that have proven health benefits to foodstuffs. The economic advantages are undeniable: recognized as safe, most often derived from food sources themselves, protected by intellectual property rights, they can generate high profit margins
- The real challenge therefore is to identify these ingredients: this is why Nestlés press release states: "Nestlé Health Science S.A. will also have access to external scientific and technological know-how through Nestlé’s innovation network as well as a number of venture capital funds in which the group has interests". This involves identifying start-ups and SMEs that have acquired real expertise in the matter.
All the major players - in food (Danone that acquired Numico, Nestlé with Inneov, and now "Health Sciences") and pharmaceutical companies (Abbott with Abbott Nutrition) - are positioning themselves on this market. I am sure that we are at the beginning of a new era in food and nutrition. It will be marked in particular by a second challenge: building brands around personal medical prevention, able to build relationships of trust with consumers.