Nestle winning with premium positioning

by Monica Watrous
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Nestle's Lean Cuisine, Stouffer's and Hot Pockets brand continue to gain steam.

VEVEY, SWITZERLAND — Nestle S.A.’s frozen food business in North America continues to gain steam behind product reformulation and marketing support for such brands as Lean Cuisine, Stouffer’s and Hot Pockets. In the first quarter of the fiscal year, the Vevey-based company posted organic sales growth of 3.9%, with overall sales of 20.9 billion Swiss francs ($21.6 billion), reflecting broad-based growth across geographies and product categories.

François-Xavier Roger, c.f.o. of Nestle

“(In) North America … we saw a clear acceleration of (real internal growth), with a strong performance of our frozen food business, and especially with Lean Cuisine and Stouffer’s, which have been really pulled by innovation and a successful new communication,” said François-Xavier Roger, chief financial officer of Nestle, during an April 14 earnings call with financial analysts. “We had a solid performance as well in ice cream and Coffee-mate.”

Products with a premium positioning, such as Häagen-Dazs super premium ice cream and Coffee-mate Natural Bliss coffee creamer, have driven growth in the United States, where Nestle said it has pared down its promotional activity recently.

Premium products such as Häagen-Dazs ice cream and Coffee-mate Natural Bliss coffee creamer have driven growth in the U.S.

“I would say that we had quite a lot of promotion in the past; we have a little bit less today,” Mr. Roger said. “So we are really focusing on building value for consumers in terms of benefit and innovation. This is largely what we did, for example, with the renovation and innovation with frozen food. This is what we do with Coffee-mate and what we do with Natural Bliss, for example, moving into the natural space.

“So it is less about trade promotion; there is still a lot, because the structure of the market is strong in that regard, but we tend to do less than in the past.”

The company also is seeing strong momentum in the coffee category; Nestle’s powdered and liquid beverages segment grew by 6.3% on an organic basis during the quarter.

Nestle said the launch of its Nespresso VertuoLine in the U.S. is doing well.

“This is largely the outcome of the fact that we have invested behind our brands and in terms of innovation as well,” Mr. Roger said. “So we see that Nespresso is doing well, as I mentioned. We are very pleased with the developments in the U.S. with the VertuoLine range. Nescafe Dolce Gusto is growing still strongly. We are in the range of something like 20%, which is Europe and Latin America. And even Nescafe is doing well across geographies. So we clearly grew much stronger than the market.”

For the full year, Nestle expects organic growth in line with 2015, which was 4.2%, with improvements in margins, underlying earnings per share in constant currency, and capital efficiency, Mr. Roger said.
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