Nestlé has announced it has sold its weight management business, Jenny Craig, in Australasia and North America to a US-based private equity group North Castle Partners.
In good news for employees, Nestlé says the new owners will retain its existing staff across both regions.
North Castle Partners is a Connecticut-based leading US private equity firm that invests in businesses that promote health, wellness and active living.
“As a firm focused exclusively on consumer businesses that promote Health, Wellness, and Active Living, we were able to draw upon substantial experience from our current and prior investments in the weightloss, nutrition and fitness industries to evaluate the Jenny Craig opportunity and develop an investment plan that will revitaliSe the company," said Chip Baird, North Castle's founder and managing partner, in a statement.
Jenny Craig was founded in 1983 and offers consumers weight management programmes tailored to their specific needs. It has been part of Nestlé Nutrition since 2006.
The transaction is subject to customary closing conditions and Nestlé has declined to disclose financial details of the deal.
The vast majority of Nestlé’s weight management sales occur in the US, where the company’s leading brand, Stouffer’s, ranks fourth behind Diet Coke, Diet Pepsi and Yoplait. Packaged food positioned at weight management saw sales reach US$31.4 billion in the US in 2012.
According to market research provider Euromonitor International, Nestlé is trying to expand the brand’s geographic coverage in ready meals through its brand Lean Cuisine brand. However, the real opportunity for Nestlé could be through its Jenny Craig brand in other regions.
"Portfolio streamlining has been a key strategy in packaged food for many multinationals in recent years but Nestlé has not divested any significant assets so far, but rather made a number of bolt-on acquisitions,” said Ildiko Szalai, Euromonitor International's senior analyst for food.
“The sale of Jenny Craig is announced to cut off a non-profitable division, which is realistic given the strong competition from Weight Watchers in the US as well as the on-going economic pressure on consumer spending power.
“Strategically the sale of a non-fitting, non-performing division makes perfect sense. Looking at the bigger picture, recently Nestlé has been linked to a bid to take over Ferrero, to enhance its scale in confectionery and boost its premium chocolate lines, which, if it’s true, could come at a high price for Nestlé.”
In October, Paul Bulcke, the chief executive of Nestlé, said at an investor presentation that there was a shortlist of business lines the company was planned to fix, although some business lines could be sold.
“We are business people. We want to do business, not get rid of business,” Bulcke said at the time. “But there are certain things that we don’t see that we can fix.”
It appears that Jenny Craig was one of the latter.