Expand, contract, repeat
Management genius consists in this: buying a bunch of companies, realizing you bought too many companies, then selling of some of those companies, then buying more companies. Brilliant!
That was the case with GE as outlined in yesterday's post. Now a Wall Street Journal article ("Crunch Time", 7/23/07) tells us the same is true of Nestlé. The world's largest food company has a problem, as its CEO discovered: "The food maker was churning out 130,000 variations of its brands, and 30% weren't making money."
So now after buying company after company (Ralston, Dreyers, Gerber, Jenny Craig, Chef America among others) over the past few years, and nearly buying Pepsico, it's working on tossing out many products and, to a lesser extent, selling off weak product limes. Nestlé has sold off 50 of its 1,200 subsidiaries over the past year, and it has dropped over 35% of its SKUs over the past two years. As the article puts it "Nestlé faces a predicament that is increasingly common in the corporate world, as a wave of consolidation creates megaliths that are bigger than ever, and now need to be rationalized."
Early results from a concentrated effort to eliminate or improve money-losing brands and divisions seem to be paying off, for now. And a more disciplined approached to creating new products has been organized, along with greater centralized data gathering. But the story illustrates the kinds of problems growing, hard-to-control, multinational companies can get into, and there's no guarantee that Nestlé won't decide it has cut back too much, and needs to grow again.
9:54:32 PM 
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