Nestle has said innovation is key to growth in developed markets where the company says achieving higher sales is “no walk in the park”.
This Swiss food giant this morning (9 August) saw its share price increase as it booked an increase in first-half profit and reaffirmed its full-year guidance.
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In North America, where Nestle said consumer confidence continued to be low, several of the Kit Kat maker’s food categories were under pressure including frozen food. Europe was an environment Nestle said had “deteriorated” during the year, particularly in the south. Real internal growth in both the US and Europe edged up 0.1% in the second quarter.
“It is interesting when you see results like the ones we just released,” CFO Wan Ling Martello told analysts on the firm’s earnings call. “By no means this is no walk in the park, these are hard fought numbers in the developed markets. In Europe it’s both PPP [Nestle’s low-price Popularly Positioned Products] and premium that are doing well.
“To be able to get the kind of numbers in developed markets where it’s very challenging from a macro perspective, innovation is going to be key.”
In North America, Martello highlighted Nestle’s challenges in the frozen pizza category.
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By GlobalData“The frozen aisle is continuing the trend as we have seen. The frozen pizza category unfortunately remains soft overall but our strong brands are enabling us to hold market share despite the significant pricing we have taken.”
Martello, however, sounded an upbeat note on the remainder of the year for US and Europe.
“People always ask, what do we see for the balance of the year. For the US and for Europe, it’s very hard to tell but what’s very comforting for us is the fact that we do not see deceleration going forward and we are cautiously optimistic given our product categories and what we’ve seen in the first half.”
Separately, Martello said the company would continue to look for acquisition opportunities, following its deal to buy the infant nutrition business of US pharmaceuticals group Pfizer for US$11.85bn in April, but not on a large scale.
“We have been very public since post the announcement of Pfizer nutrition that we will not be doing any significant deals and if anything we will look at bolt-on acquisitions here and there but no significant transactions post Pfizer.”
