>> Activist Dan Loeb has set his sights on Kit Kat maker Nestle, but his real target should probably be the company's crunchy corporate governance. I'm John Foley, European editor at Reuters Breakingviews in London. So Nestle isn't a company that's doing particularly badly, it has a lot of big brands like Kit Kat's doing quite well.
However, it's a bit sleepy. Its margins, its profitability is a bit lower than some of its rivals like Reckitt Benckiser. And basically the company's been a bit slow to sell some of the less healthy parts of its portfolio. It also owns a huge stake for not really any good reason in consumer goods company L'Oreal.
So Dan Loeb, activist shareholder, has come in and is trying to shake up what's effectively been a very sleepy Swiss organization, trying to make it a bit more modern, a bit more nimble and slim it down. So the problem with what Dan Loeb is suggesting is that it ranges basically from the obvious to the pointless.
He's come up with some new profitability targets, 20% margin. That's fine, but Nestle has a history of setting targets and missing them. So there's no guarantee that just cuz it sets a new target it will hit it. Also, the idea that it should sell unhealthy food types, and also get rid of the stake in L'Oreal, is something that investors have basically been asking it to do for a very long time.
So none of this is particularly new, although it's all pretty good as far as it goes. Now the real problem with Nestle is not whether it should slim down its portfolio, it's how to shake up its sleepy Swiss governance culture. And one of the big problems, as far as we're concerned is that Nestle has a habit of turning its chief executives into chairmen.
The new guy, Mark Ulf Schneider, who came in here, he actually started on the 1st of January this year. He's the first outside chief executive Nestle has had for a very long time. But he's got former chief executive, Paul Bulcke, still in the chairman's seat, breathing down his neck.
So if you wanna really shake up Nestle and get some new fresh air and fresh ideas in there, possibly the real target should be the boardroom. It should be about getting a new chairman into Nestle as quickly as possible, so the chief executive can really do his job with a free hand.