Nestlé results driven by ‘value-for-money’

By Dan Colombini

- Last updated on GMT

Related tags Developed country

UK shoppers' search for value resulted in Nescafé Dolce Gusto machine sales increasing by 77%
UK shoppers' search for value resulted in Nescafé Dolce Gusto machine sales increasing by 77%
UK consumers’ growing demand for value-for-money spiced by the occasional luxury has impacted results at confectionery giant Nestlé after the firm predicted a cautious outlook for this year.

Following the release of Nestlé’s global full year results today, the firm highlighted cost-conscious UK shoppers’ search for value as a key factor in a “tough​” 2012 market.

However, Paul Grimwood, Nestlé UK and Ireland chairman, believed that the firm will be well positioned to meet this demand after posting strong results for last year.

He said: “2011 was a strong year for Nestlé UK & Ireland despite the difficult economic climate. UK shoppers are adapting to challenging times, they still want to provide their families with good quality food and drink, and the occasional luxury – they’re just looking for value in the way that they do it.

“2012 will continue to be tough but our focus remains on developing new products to meet changing demand to drive growth. If we continue to invest in our business and our brands during challenging times we will be in a much stronger position when the economic climate improves​.”

Consumer’s taste

Nestlé cited the UK consumer’s taste for coffee and chocolate as an example of how the search for better value products had affected sales.

The firm claimed that sales of its Nescafé Dolce Gusto brand, which provides cheaper coffee than high street retailers, had increased machine sales by over 77% for the year. Nestlé’s confectionery division was also boosted by sales increases in chocolate multipacks and confectionery share bags, which rose by 17.2% and 30% respectively.

The UK and western Europe’s taste for frozen pizza and coffee also boosted sales at the firm, despite the unstable economic climate in the region.

Nestlé said that it overcame the tough economic conditions to deliver growth in the UK and France, with sales in Portugal, Italy, Greece and Spain collectively rising by 3.7%.

Tough economic conditions

In western Europe all markets overcame tough economic conditions to deliver real internal growth,” ​a statement from the firm revealed.

“The Benelux countries and Great Britain did well and all the key categories grew with soluble coffee, chilled culinary, frozen pizza and petcare among the highlights​.”

Nestlé saw sales in Europe rise by 4% to £10.4bn (CHF 15.2bn) for the period, with real internal growth up 1.8%. The firm also announced a trading operating profit margin increase of 15.6% for the region.

Overall the firm warned of a cautious outlook for this year despite a strong global performance for 2011, which it described as “a challenging year​”.

Nestlé reported overall sales of £57bn for the year, an increase of 7.5%. Operating profit also increased by 15% to £8.5bn.

Sales in emerging markets rose by 13.3%, with developed markets also showing an increase of 4.3%.

Paul Bulcke, Nestlé ceo, said: “We delivered good performance, top and bottom line, in both emerging and developed markets in 2011. It was a challenging year, and we do not expect 2012 to be any easier. We have continued to invest for the future and strengthen our capabilities across the world. We have established new partnerships in China.

“Nestlé Health Science has got off to a good start. Our innovation is creating opportunities in all categories, whether bringing new consumers to our brands in emerging markets, or building on our consumers’ engagement with our brands in the developed world. We are therefore well-positioned in 2012 to deliver the Nestlé model of organic growth between 5% and 6% as well as an improved margin and underlying earnings per share in constant currencies​.”

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