Nestle is on the prowl – but where will it spend its $28bn cash pile?

Swiss giant Nestle is still the biggest food company in the world but one of its main rivals Kraft just got much bigger with the successful absorption of £12bn Cadbury, in financial terms anyway, making it now the clear number two in food.

Kraft has also upped the ante in the food stakes by increasing its marketing budget substantially and hiring a clutch of creative agencies like current fave Crispin Porter + Bogusky, now charged with reviving Jello and Milka.

Nestle is still sitting on the $28bn it trousered when it sold its stake in US eyecare company Alcon to Novartis and hasn’t pulled off a really big deal for years. It stayed on the sidelines in the battle over Cadbury, probably reasoning that the EU would have taken a dim view if it had wanted to get any bigger in chocolate.

But there are lots of other areas in could look at apart from food. In September it announced it was to invest $500m in a ‘health sciences’ start-up and there are numerous companies out there with stakes in that nascent industry that it could buy.

Household goods company Reckitt Benckiser has demonstrated the gains to be made from heavily marketed consumer pharmaceutical products with the returns it is making on brands like Clearasil, Nurofen and Stepsils, acquired from Boots five years ago for what now looks like a bargain £1.9bn.

And back in food there are companies like the UK’s Premier Foods which is currently suffering the after-effects of a £2bn acquisition spree that brought brands like Bisto, Branson, Hovis, Mr Kipling and Sharwood’s into its stable.

Such brands are often decried as ex-growth in the UK and Europe but that largely depends on what you do with them and how much money you’re prepared to put into the exercise, as RB has demonstrated. Unilever also has some unloved food brands like Marmite in need of a new home.

And with consumers in places like China, India and Indonesia showing an increased appetite for Western-type food (meat mostly) that’s another reason to revalue them.

My spies tell me Nestle is definitely up to something. But what will it be?

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.