Blog: It's tough at the top
Dean Best | 17 August 2009
Last week, we were given further insight into how food manufacturing and retail majors are fairing in the current difficult trading environment when behemoths Nestle and Wal-Mart delivered their first half results.
Nestle's European peers – including Cadbury, Unilever and Danone – have all beaten consensus expectations in their respective first-halves, putting considerable pressure on the Swiss company to book a strong performance.
When the group posted a 2% drop in profits on organic growth of 3.5% - falling short of consensus estimates of 3.9% and its own target of 5% - the market reacted unfavourably and shares plummeted.
As Kepler Capital Markets analyst Jon Cox told just-food: “Nestle is a bit unfortunate that is reporting after all of the other majors in food, who have basically beaten results. It missed top line when another beat had been expected.”
During the half, Nestle saw particular problems in its European businesses, where organic growth increased just 0.2%. In the region, Nestle sales lagged as its competitors stepped up their investment in marketing and innovation.
Nevertheless, the group insisted that it expected its European performance to improve in the second half of the year, as pressure from customers over pricing is alleviated.
Indeed, it seems likely that Nestle will now look to pick up the pace of organic growth, approaching the final six months of the year firing on all cylinders.
With US retailers struggling as consumer confidence comes under continuing pressure and food deflation hits sales, Wal-Mart was able to beat expectations when it posted earnings per share at the top end of its forecast on sales that were down 1.4%.
The world's largest retailer shrugged off a 1.5% drop in ID sales at its Wal-Mart US business,which fell short of the company's guidance of flat to positive 3% comparable-store sales growth. Instead, Wal-Mart pointed to an increase in footfall and market share growth during the period to suggest the health of its US operations.
Wal-Mart's discount positioning and investment in communicating its value-message has allowed it to attract more shoppers.
A pertinent question, then, is whether Wal-Mart will be able to hold on to these new customers when the economic situation improves. The retailer's answer has been to embark on an extensive programme of store remodels – 500-600 each year for the next five years.
"It's not just remodelling, its about re-engineering the stores to improve the overall shopping experience,” a spokesperson for the company told just-food.
As we move into the second half, all eyes will be focused on whether the world's largest food maker and retailer will be able to strengthen their positions further – particularly in the key markets of Europe and the US.
Katy Humphries, Deputy Editor
The UK's competition regulator has given the all-clear to Hain Celestial's bid to buy UK food and beverage group Orchard House Foods, nine months after the US group announced the deal....
Hershey made an unusual announcement today (20 September), sharing its own sales data for the last four weeks to assuage any possible investor concern over figures released by Nielsen....
As the UK starts to ponder what kind of a relationship it wants with the European Union post-Brexit, EU leaders have been lining up to warn that Britain will not be allowed to "cherry pick" deals and ...
Low food prices continue to hold back inflation rates in the UK as the supermarket price war continues in the face of rising import costs. ...
- Interview: Mondelez eyes sweet success in China
- The benefits of engaging staff in sustainability
- How food companies involve staff in sustainability
- Why Danone is withdrawing Dumex from Vietnam
- Why May's Brexit comments give reason for optimism
- 2 Sisters chief Boparan buys Bernard Matthews
- Fonterra says value-added strategy paying off
- B&G Foods acquires ABF's US spice business
- General Mills profit falls as sales disappoint
- Ahold Delhaize resolves Kraft Heinz delisting spat
- The Big 15: Strategies and Priorities of Top Packaged Food Players in Comparison
- Global Chocolate Confectionery Overview: Challenges, Opportunities and Risks
- Global Foodservice Market 2016-2020
- Global Food and Drinks Closures: Performance and Opportunities
- Fast Food Restaurants in the US - Industry Market Research Report