Nestle: reports strong, broad-based organic growth

Vevey / CH. (nsa) In the first nine months of 2011, Swiss Nestle Group´s organic growth was 7,3 percent, including 4,1 percent real internal growth and pricing of 3,2 percent. Foreign exchange decreased sales by 15,1 percent, and divestitures (mainly Alcon) net of acquisitions by 5,7 percent. Organic growth of 7,3 percent for the nine months constitutes broad-based out-performance against the growth rates in Nestle´s categories and markets. The organic growth was 5,8 percent in the Americas, 5,0 percent in Europe and 13,1 percent in Asia, Oceania and Africa. Developed markets grew 4,0 percent, while emerging markets achieved around 13,1 percent organic growth.

Business Review Zone Americas

Sales of 19,1 billion CHF, 5,6 percent organic growth,
0,8 percent real internal growth

In North America the tough economic conditions and increased pricing led to a decline in consumption in several categories, but new lines like DiGiorno Pizza Combos, Lean Cuisine snacks, and Dreyer´s Smoothies helped mitigate the effects of the slowdown. PetCare saw accelerated growth and market share gains as did frozen pizza. Coffee-mate enjoyed strong growth thanks to new varieties of Cafe Collections and a successful launch of Coffee-mate Natural Bliss. Nescafe also performed well.

In Latin America the business continued to deliver strong growth. The Group pushed distribution deeper into the markets across the continent and introduced new product lines. Most categories benefited, recording double-digit growth. Among market launches were Nescafe Molienda, a new soluble coffee product with micro-granules in Mexico, and KitKat in Brazil.

Business Review Zone Europe

Sales of 11,1 billion CHF, 3,8 percent organic growth,
2,2 percent real internal growth

In a challenging environment Nestle outgrew the European market. In Western Europe there were market share gains in two thirds of the categories. This was achieved by the Group´s continued roll-out of innovations like Nescafe Dolce Gusto and Maggi Juicy Roasting across Europe. France was a particular highlight but there was also good growth across most of Western Europe including Italy, Switzerland and the Benelux countries. Despite the economic crisis, Greece and the Iberian region did well.

In Central and Eastern Europe, Russia continued to be a tough market, although culinary performed well. Elsewhere in Eastern Europe growth was stronger with Ukraine achieving good results and the Adriatic region growing more than ten percent. PetCare performed strongly, with innovations like single serve pouches from Felix helping the business build market share.

Across the Zone, soluble coffee, chilled culinary, ambient culinary, frozen pizza, sugar confectionery and PetCare all delivered good levels of growth thanks to the added value created by innovations. The ice cream category had a poor season and as a result the performance was below the Group´s expectations. Strong brand performances included Nescafe, pursuing a clear segmentation strategy with products like Nescafe Green Blend and Nescafe 3-in-1, and also Maggi, Herta and Purina ONE.

Business Review Zone Asia, Oceania and Africa

Sales of 11,1 billion CHF, 11,7 percent organic growth,
8,2 percent real internal growth

The Zone´s emerging markets delivered double digit growth, and most categories were high single or double digit. The Group continued to deepen its involvement in the development of Africa, making new investments and expanding its distribution networks to support popularly positioned product roll-outs for categories including culinary, dairy, powdered beverages and soluble coffee. In Greater China, South Asia and Indochina Nestle continued to achieve double-digit growth.

The Zone´s developed markets recorded positive growth. In Japan there were market share gains for soluble coffee, chocolate and ready-to-drink beverages. The Nescafe coffee systems, Dolce Gusto and Barista continued to perform well there and the Group launched successfully the new KitKat Black. In Australia the confectionery, ice cream and PetCare businesses all added market share.

Across the Zone as a whole, growth was broad-based with pricing increasing over the course of the year. In particular, there was strong growth in ambient dairy with the Nestle Nido brand. Nescafe, Maggi, Milo, ice cream and ready-to-drink beverages also grew rapidly.

Business Review Nestle Waters

Sales of 5,1 billion CHF, 4,7 percent organic growth,
3,2 percent real internal growth

In Europe Nestle´s brands delivered growth and gained market share. In France and Belgium the growth in volumes was driven by Hepar, Vittel, Perrier and S.Pellegrino. There were gains in the UK, Switzerland and Germany.

In North America the Group´s regional brands came under competitive price pressure, but overall its growth was positive thanks to strong performances from the international brands Perrier and S.Pellegrino.

The emerging market business continued to achieve double-digit growth. Nestle Pure Life recorded a strong performance across Africa, Asia and Latin America.

Business Review Nestle Nutrition

Sales of 5,4 billion CHF, 7,6 percent organic growth,
5,2 percent real internal growth

New products helped drive growth for Nutrition, with the Infant Nutrition division continuing its strong performance both in formula and cereals. Successful launches of new infant cereal products with pro-biotics and infant formula designed to reduce colic helped achieve the strong growth in emerging markets. Market conditions were tough in the United States. Europe showed continued strong momentum, especially in France. Nestle BabyNes was launched in Switzerland in May. It has showed promising early results with very high consumer satisfaction ratings.

Jenny Craig remained at low levels in the face of intense competition in the US. The European roll-out continued to go well though. Performance Nutrition faced similar challenges in the US but grew well in Zone Asia, Oceania and Africa.

Business Review Other

Sales of 9,1 billion CHF, 11,4 percent organic growth,
8,8 percent real internal growth

Nestle Professional achieved strong worldwide growth, continuing to introduce innovative products and systems in both beverages and food. The Group´s beverage business was the main driver, recording double-digit growth. The premium Nescafe Milano beverage solution was rolled out to North America, France, Malaysia and Germany, capitalising on its unique branded products, system and service. Launched first in France, Viaggi, the new super premium system is now being rolled out to other markets in Europe. The branded food business continued to perform particularly well in Asia and in Latin America where the out-of-home market enjoyed good momentum. In an effort to stimulate additional growth in Europe, the Group has introduced Maggi bouillons incorporating the latest granulation technology, as well as the second wave of Chef Jus and Fonds in flakes.

Nespresso continued its strong growth in Europe while the roll-out to the rest of the world continued. Four new machines, the Pixie, Lattissima+, Aguila and Zenius were launched this year. Nespresso is on track to extend its retail network to more than 250 boutiques this year to meet growing consumer demand, with new boutiques opening in locations as far apart as Paris, Johannesburg, Auckland and Osaka.

Nestle Health Science, established in January, enjoyed good growth and market share gains while at the same time building up its operational capabilities and acquiring Prometheus Laboratories Inc., a US firm specialising in diagnostics and licensed speciality pharmaceuticals; Vitaflo, a provider of clinical products and CM+D Pharma Limited, a company that specialises in the development of products for patients with conditions like kidney disease and inflammatory bowel disease.

Among the Group´s joint ventures, Cereal Partners Worldwide and Beverage Partners Worldwide achieved mid-single digit organic growth, whilst Galderma grew high single-digit, with strong performances in the emerging markets.

Outlook

For the year as a whole, in spite of input cost pressures, Nestle S.A. expects to slightly over-perform against its long-term organic growth range of five to six percent and the Group continues to strive for a margin improvement in constant currencies.