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June 19, 2006
Owning Both Ends Of An Economic Cycle

This seems almost unfair:

In a twist in corporate synergy, chocolate-maker Nestle AG said Monday it will fatten up its weight-loss business by buying Jenny Craig Inc. for $600 million.

The acquisition follows Nestle's purchase for around $670 million last month of Uncle Tobys, an Australian maker of nutritional cereals and snacks, and is part of the company's "continuing commitment to nutrition, health and wellness," the Swiss company said in a statement.

While best known for its namesake chocolates, Nestle is the world's largest food and drinks company, making baby formulas, nutrition foods such as PowerBar, drinks to aid weight loss and the Lean Cuisine line. The company's purchase of Jenny Craig follows the lead of consumer products company Unilever, which bought both Ben & Jerry's ice cream and Slim Fast in 2000.

So Nestle will sell you enough of their original product line until you need Jenny Craig -- and then sell you Lean Cuisine for maintenance. That sounds like a clever and rather cynical marketing strategy, doesn't it?

However, there may be more to this than just cynicism. With class-action activists targeting the food industry for making consumers fat, these companies are smart to diversify. The trend for food has gone towards healthier options, and high-sugar/high-fat products will continue to slow. Nestle made the right choice in an overall strategic sense, although the individual performance of Jenny Craig may or may not pan out for the Swiss chocolatier.

Still, that cycle looks pretty strange in a corporate portfolio ....

Sphere It Digg! View blog reactions
Posted by Ed Morrissey at June 19, 2006 9:07 AM

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