Nestlé`s Diversification through Palforzia: The Setback and Lessons

Nestlé`s Diversification through Palforzia: The Setback and Lessons
Case Code: BSTR663
Case Length: 13 Pages
Period: -
Pub Date: 2023
Teaching Note: Available
 Price: Rs.400
Organization : Nestlé S.A.
Industry : Food & Beverage
Countries : United States
Themes: M&A, Diversification Strategy, Product Strategy & Design,New Product Development
Nestlé`s Diversification through Palforzia: The Setback and Lessons
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The case “Nestlé’s Diversification through Palforzia: The Setback and Lessons” explores Swiss multinational food and beverage conglomerate Nestlé S.A. (Nestlé)’s failure to capitalize on its blockbuster hopeful peanut allergy medicine – Palforzia. The case mentions the various reasons that drove Mark Schneider (Schneider), who became CEO of Nestlé in 2017 to acquire Aimmune Therapeutics (Aimmune), the company that had developed Palforzia, for a whopping US$ 2.1 billion, a 174% premium on Aimmune’s share price, in 2020.

The case then documents the various factors that led to Palforzia failure to gain acceptance among both patients and doctors, causing it to be relegated to a niche therapy. Schneider realized the difficulties of launching a successful drug and so began contemplating strategic alternatives for it. Though analysts commended Nestlé’s quick course correction in response to the Palforzia setback, they wondered whether the company had adequately assessed the risks associated with product development and market competition before acquiring Aimmune. The case raises the broader question of how companies can effectively balance the inherent risks in launching innovative products like Palforzia with their potential rewards, thereby framing a viable diversification strategy.

Issues

The case is structured to achieve the following teaching objectives:

  • Evaluate the importance of aligning acquisitions and diversification efforts with a company’s long-term growth strategy and core competencies.
  • Understand the acquisition process, including due diligence, risk assessment, and the factors to be considered before acquiring a company in a new sector.
  • Explore the risks associated with launching innovative products and understand how companies can identify, assess, and mitigate these risks effectively.
  • Explain the importance of adaptability and the ability to make quick course corrections in response to market challenges and setbacks.
  • Evaluate the importance of aligning acquisitions and diversification efforts with a company’s long-term growth strategy and core competencies.

Contents

Keywords

Strategic Diversification; M&A Strategy; Market Research and Assessment; Risk Management; Marketing Challenges; Inorganic Growth; Due Diligence; Risk Assessment; Innovation; Core Competence; Long Term Strategy; New Product Development; Product Failure; Leadership; and Market Competition;Nestle; Food and Beverage industry; Pharma Industry; Blockbuster Drug; Drug Trials; Product Launch; OIT; Peanut Allergy

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