The recipe is changing for the food industry. Processed food sales are under pressure in America where consumers are seeking out healthier alternatives. For gluten-free or organic goods they are turning to new brands and smaller producers they think they can trust.
It leaves companies like Nestlé, the world’s largest food company that feeds and waters millions with brands such as KitKat, Nescafé and San Pellegrino, with a problem. “I think at the back of everybody’s mind we always have this idea that small is beautiful and big is a little bit ugly,” says Peter Brabeck-Letmathe, the company’s chairman.
“So automatically when you see something which is small or more regional it has to be better, whether it is true or not is not important. Perception is reality, OK?”
The consumer, he thinks, “is looking for distraction. They want to see new things happening in their consumption pattern whether this is no gluten or organic or all-natural.”
But it is not always a distraction grounded in scientific fact. “There are so many people who are defining what is healthy and the media is multiplying the thing even more. But the fact is that there is very little that is really scientifically proven.”
He questions the gluten-free revolution – the removal of the protein found in wheat and barley that holds food together but is linked to bloating and stomach cramps. Some 20 per cent of people say they want to eat gluten-free, even though “this is absolutely wrong because for 98 per cent of [them] gluten is very important, especially for children in their development because of the protein that it has.”
Brabeck-Letmathe blames Hollywood stars for amplifying diet changes well beyond the 1.5 per cent of the population for whom gluten causes an allergic reaction. It is not the first time that diets have been distorted.
Nestlé is trying to overcome another perception failure by reinventing frozen food, which consumers are ditching in favour of fresh.
“You will not have a healthier product than a frozen vegetable – and we are not in the vegetable business,” he says, having relaunched Lean Cuisine ready meals with a full range of organic and gluten-free options. The company is also revisiting old recipes to reduce sugar, salt and artificial flavours where it can.
Brabeck-Letmathe, a wily Austrian, has seen it all in close to 50 years at Nestlé. In the battle of the supermarket aisles with other food giants such as Procter & Gamble, Unilever, Danone and Kraft, he has hived off slow-growth divisions such as dried pasta and spent heavily on sophisticated new ways of consumption such as the Nespresso coffee-capsule system, now a middle-class favourite.
Nestlé is far from small, with 339,000 staff and annual sales of £60bn. But it does not mean Brabeck-Letmathe is above concern at the “ruthless and reckless game of consolidation” that is sweeping in the industry. It is being led by activist investors including Warren Buffett who are forcing through mergers such as between the processed-cheese maker Kraft and Heinz in a bid to squeeze costs and thousands of jobs.
We meet at the Salzburg Festival, which Nestlé has sponsored since 1991 and where it has given an award for the best young conductor since 2010. Brabeck-Letmathe, 70, looks healthier than when I saw him just over a year ago. His grey hair is starting to grow back after treatment for a “curable illness” that Nestlé assured investors would not stop him working.
“Let me put it this way: you never know with this stuff but for the time being no treatment is foreseen, so I am free.” His doctor had banned him from flying long distances, an odd sort of purgatory for a jet-set executive, but he put the spare time to good use, qualifying as a helicopter pilot in January.
It was that ambition to travel that drew the young Brabeck-Letmathe to Nestlé in the first place. He spent 17 years with the company in Latin America, arriving in Chile just before the Marxist Salvador Allende was elected President, continuing his ascent after returning to the group headquarters in Vevey, Switzerland, in 1987.
His relationship with chief executive Paul Bulcke took off when they worked together in Latin America, so much so that they speak Spanish to each other even though one is Belgian, the other Austrian.
He has amassed a string of other influential roles, sitting on the board of beauty group L’Oréal, oil giant ExxonMobil and also chairs Formula One. His profile means that Brabeck-Letmathe is often the first line of defence when things go wrong. Still associated with that baby-milk scandal, Nestlé’s latest row has blown up in India, where health authorities say the lead and monosodium glutamate levels in its Maggi noodles are too high. Nestlé disagrees, but has had to take 30,000 tons of noodles off supermarket shelves.
It is potentially hugely damaging but a short-term worry compared to the food industry’s biggest challenge: how to increase production by 70 per cent by 2050 to feed the extra two billion people on the planet and greater demand for richer diets.
Brabeck-Letmathe thinks it can happen as long as a single resource is better managed: water. As chairman of the 2030 Water Resources Group, a public-private group pushing for water reform, he regularly gets quoted as saying that access to water is not a human right, a controversial stance from the seller of millions of bottles of Nestlé Pure Life and Buxton.
That is only half the story. He insists that water is a human right for the 25 to 50 litres needed per day for hydration and minimum hygiene – making up 1.5 per cent of the water that is being withdrawn from the system. The rest, less so.
“To fill up your swimming pool is not a human right or to water the golf course is not a human right, OK? We are still using water like it was given from heaven.”
Having warned five years ago that the world will run out of water long before it runs out of oil, he says the answers are out there. “If we had the water efficiency of Israel in agriculture in the rest of the world we wouldn’t have the problem, straightaway. If we had the water efficiency of Singapore in households we wouldn’t have a water problem. So we know where the answers are but there is not sufficient political will to implement [them].”
Even though it is one of the biggest drinks companies in the world, Nestlé’s water use is “minimal” he argues, calculating the company withdraws 0.0009 per cent of the world’s water: “So even if you say that Nestlé shouldn’t have a right to sell water, if wouldn’t solve anything.”
Such is the size of Nestlé’s business in the UK, he can’t help worry about the impact of the withdrawal of the UK from the European Union. “I think it would be really very negative for Europe and for the UK.”
Nestlé has built up its supply base in the UK, with a big chocolate operation in York, the result of its takeover of Rowntree Mackintosh, plus mineral water bottled at Buxton in Derbyshire and various coffee factories. It adds up to close on £400m of exports but “those things would most probably fall apart” if the UK left the EU. It sounds like he is saying that small isn’t always so beautiful.
The CV: Peter Brabeck-Letmathe
Education: Studied economics at the University of World Trade in Vienna.
Career so far: Joined Nestlé in 1968 as an ice cream salesman, heading to Latin America in 1970 as national sales manager of Chile. Returned to Switzerland in 1987 to run the culinary products division, becoming chief executive in 1997, chairman and chief executive in 2005 and chairman from 2008. Intends to retire in 2017.
Personal: Married with three children and four grandchildren. Relaxes by mountain climbing and playing the piano.
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