Nestle sales climb in quarter; volatility expected going forward

by Eric Schroeder
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VEVEY, SWITZERLAND — Net sales at Nestle S.A. climbed more than 5% in the first quarter of fiscal 2013, driven by growth across all three geographies in which it operates. Sales in the period from January to March totaled 21,939 million Swiss francs ($23,555 million), up from 20,823 million Swiss francs in the same period a year ago.

Paul Bulcke, chief executive officer of Nestle, said sales in developed markets, such as the United States and Europe, were held back by low consumer confidence during the period, but Nestle expects to see further momentum in key emerging markets.

“The start to the year reflects the caution we expressed in February,” Mr. Bulcke said. “We continue to expect some volatility throughout 2013, but reconfirm our expectation to deliver on our commitments for the full year: top line, bottom line and capital efficiency.”

Sales in Zone Americas totaled 6,638 million Swiss francs in the first quarter ($7,125 million), which compared with 6,460 million Swiss francs in the same period a year ago.

Nestle said Zone Americas grew in both North America and Latin America. Growth was broad-based with particular strength in dairy, chocolate, powdered beverages and culinary.

“North America continued with the trend seen in 2012, reporting positive real internal growth and pricing,” Roddy Child-Villers, head of investor relations at Nestle, said during an April 18 conference call with analysts. “The pizza market returned to growth in the first quarter, and we saw good growth in DiGiorno, helped by a strong start from the Pizzeria! launch. Stouffer’s and Hot Pockets both gained share.

“Sales of Lean Cuisine fell in the quarter, impacted by continued weakness in the diet category, increased competition and promotional activity. More positive for Lean Cuisine is the early performance of Salad Additions. Ice cream also had volume growth helped by the Häagen-Dazs Gelato launch in the super premium segment.

“Nescafe continued to perform well, particularly Classico. Coffee-Mate also achieved share gains, these in powder and Natural Bliss remained the highlight.

“Confectionery had a very strong start to the year. Skinny Cow performed well, and the launch of Butterfinger Bliss king-sized pack looks like a success.”

Sales of Nestle Nutrition increased 32% to 2,482 million Swiss francs from 1,877 million Swiss francs. Performance nutrition and weight management sales struggled to start the year, but Nestle said infant nutrition performed well, driven by the roll-out of major innovations in formula, meals and drinks and cereals, and appropriate level of brand support.

Sales within the Nestle Waters division rose nearly 3% to 1,597 million Swiss francs from 1,552 million Swiss francs. Nestle said the late arrival of spring affected its developed markets.

“You might remember that Nestle Waters had a very strong start to 2012,” Mr. Child-Villers said. “Well, not so in 2013. The weather has been poor in Europe and North America, where we have 80% of our sales. And the situation in both regions has been extremely competitive. More positively, we have continued to achieve double-digit growth in emerging markets. In North America we grew marginally despite the tough comparative of near double-digit growth in 2012 and despite increased price competition in 2013. The regional waters were most under pressure, whilst Nestle Pure Life continued to perform well.”
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