Third Point's letter got Nestlé buying back CHF 20B and selling slow brands

On June 25, 2017 Daniel Loeb disclosed that Third Point had bought a 1.3% stake in Nestlé for $3.5 billion and sent a letter saying the company had fallen behind, urging cost cuts, the sale of non-growth businesses and the L'Oréal stake, and share buybacks (UPI).

Days later Nestlé's board approved a CHF 20 billion buyback and outlined a value-creation model built on margin improvement and capital efficiency (press release, June 27, 2017). In September 2017 it set its first margin target: 17.5-18.5% by 2020, up from 16% in 2016 (FT via Swissinfo).

Nestlé then reshaped the portfolio: it sold its US confectionery business to Ferrero for $2.8 billion in January 2018 (BBC) and completed the CHF 20 billion buyback in December 2019 (Reuters). Its underlying trading operating profit margin reached 17.6% in 2019, hitting the target a year early.

Nestlé completed a CHF 20B buyback, sold US confectionery to Ferrero for $2.8B, and lifted its underlying operating margin to 17.6% by 2019.

The letter quantified the problem: earnings per share had not grown in five years.

A visible buyback answered the criticism faster than a strategy speech.

A margin target gave management a metric to reorganize around.

Divestitures recycled low-growth brands into higher-growth categories.

A written outsider case about margins and capital returns can shift a consumer giant's priorities; Nestlé kept its growth ambitions but adopted the returns it had long resisted.

Nestlé kept the capital-return model: it launched a second CHF 20 billion buyback program in 2020 and continued pruning the portfolio. Third Point later exited, but the margin discipline and returns survived the activist.