Nestle plans to grow medicinal foods business

By FRANK JORDANS Associated Press Writer

LAUSANNE, Switzerland (AP) - Nestle plans to plow hundreds of millions of dollars into expanding its medical nutrition business over the next decade, hoping to capitalize on a growing market for foods to help treat chronic conditions such as diabetes and obesity, the Swiss consumer giant said Monday.

Nestle SA said it aims to "pioneer a new industry between food and pharma" by creating a medical nutrition institute in Switzerland and a subsidiary called Nestle Health Science SA.

The Vevey-based company is one of the world's biggest makers of processed foods including Nesquik cereal, Haagen-Dazs ice cream and Nespresso coffee, with sales of some $100 billion last year.

Peter Brabeck-Letmathe, Nestle's chairman and former chief executive, said existing health care systems can't cope with the growing number of people suffering from diabetes, obesity, cardiovascular disease and Alzheimer's.

"Personalized health science nutrition is about finding efficient and cost-effective ways to prevent and treat acute and chronic diseases in the 21st century," he said.

Chief Executive Paul Bulcke described the new venture as a "promising business opportunity." Medical nutrition is considered high-margin business compared with the aggressively competitive consumer food market.

Nestle Health Science will start operation Jan. 1, 2011, and be run "at arm's length" from the main food and beverages business, the company said.

The new subsidiary will ingest Nestle's existing medical nutrition business, which had a turnover $1.6 billion last year. Brabeck said the company will be actively looking for acquisition and licensing opportunities in the field of health and nutrition.

The new Institute of Health Sciences will be run by Emmanuel E. Baetge, former chief scientific officer of San Diego-based biotech company ViaCyte, and will be based at the Swiss Federal Institute of Technology in Lausanne.

Last month Nestle purchased British company Vitaflo, which makes foods for people with inherited metabolic disorders.

Nestle share rose 0.7 percent to 53.10 Swiss francs ($53.91) on the Zurich exchange.