New products, good execution sustain growth at Nestle

by Eric Schroeder
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VEVEY, SWITZERLAND — The continued roll-out of new products, along with solid execution, sustained organic sales growth at Nestle S.A. during the first quarter despite difficult market conditions, said Paul Bulcke, chief executive officer of the Vevey-based company.

During the January to March 2014 period, Nestle said organic growth was 4.2%, composed of 2.6% real internal growth and 1.6% pricing. Sales during the first quarter totaled 20.8 billion Swiss francs ($23.6 billion).

“Our organic growth in the first months of the year was in line with expectations and driven by volume rather than price,” Mr. Bulcke said.

In Zone Americas, Nestle posted sales of 6,042 million Swiss francs ($6,860 million), representing 4.1% organic growth and 0.9% real internal growth.

“Both the North American and the South American businesses had their own challenges,” Wan Ling Martello, executive vice-president and chief financial officer, said during an April 15 conference call with analysts. “On the positive side, where we have driven innovations we’ve seen great traction and growth.”

Ms. Martello said Nestle faced “some really extreme weather” in North America during the first quarter.

“This affected not only consumer behavior but also the infrastructure, factory operations, transport links and retail,” she said. “So that had an impact on our performance, too. Looking at our categories, frozen pizza had a good quarter with California Pizza Kitchen due to the launch of the renovated crispy thin crust, a must for all you pizza lovers out there. Lean Cuisine grew on the back of the recent launches of stuffed pretzels, and Lean Cuisine Morning Collection, although this was helped by easier comps. Stouffer’s and Hot Pockets had a more difficult quarter. And to wrap up frozen, ice cream had a strong quarter in super premium, with a weaker performance in snacks and premium.

“In soluble coffee we gained market share with both Nescafe Classical and Taster's Choice. Coffee-Mate continued its momentum, helped by the launch of new flavors. Moving on to confectionery, our chocolate business was impacted by the shift in Easter holidays. Early Easter last year contributed to a double-digit growth in 2013. However, I’m happy to say that our most recent launch of Butterfinger Cups is really performing well.”

In Zone Europe, sales totaled 3,533 million Swiss francs, down 0.8% in terms of organic growth but up 0.7% in real internal growth. Meanwhile, Zone Asia, Oceania and Africa posted sales of 4,436 million Swiss francs, up 5.3% on an organic basis and up 2.9% in terms of real internal growth, Nestle said.

Looking ahead to the full year, Nestle confirmed its outlook, noting that performance will be weighted to the second half, outperforming the market, with organic growth of about 5% and improvements in margins, underlying earnings per share in constant currencies and capital efficiency.
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