Nestlé boss expects another tough year
“Last year was challenging and 2014 will likely be the same,” said Bulcke. “I, therefore, expect our 2014 performance to be similar to last year and again weighted to the second half, outperforming the market, with growth around 5% and improvements in margins, underlying earnings per share in constant currencies and capital efficiency.”
The firm reported 4.6% organic growth and 3.1% real internal growth. Trading operating profit margin was up by 20 basis points to 15.2% and by 40 basis points when measured in constant currencies.
In western Europe, the best performing markets were the UK and Ireland, Switzerland, the Netherlands, Belgium and Austria. But southern Europe continued to experience weak consumer confidence.
UK and Ireland
The Russian market was the highlight among central and eastern European markets, as the region produced “robust real internal growth despite difficult economic conditions and intense price competition”.
In North America, the frozen food category contracted, particularly impacting Lean Cuisine, but Stouffers achieved positive growth, and in frozen pizza DiGiorno gained market share.
Nestlé’s super premium ice cream business grew, due partly to the success of Gelato, but snacks and premium had a more challenging year. Chocolate delivered a good performance.
The firm achieved double digit growth in Latin America last year. In Brazil, key growth drivers were Kit Kat, and its Nescau and Ninho brands. In Mexico, Nestlé improved the performance of soluble coffee and launched its Nescafé 3 in 1 product. Nescafé Dolce Gusto produced double-digit growth across the region. Culinary solutions in dairy, particularly Carnation, also did well, according to the firm.
“The macro-environment in 2013 was one of soft growth, minimal in the developed world and below recent levels in the emerging markets,” said Bulcke. “Our response was to increase brand support, accelerate innovation, and to ensure our pricing was sensitive to consumer needs. This gave impetus to our real internal growth and, together with efficiencies and structural cost savings, contributed to our margin improvement and strong cash flow.
'Best opportunities'
“We also intensified our portfolio management which resulted in some charges in 2013 but ensures we are putting our people and resources behind the best opportunities.”
The firm’s long-term strategy was to the leader in nutrition, health and wellness, he added. “We reinforced this strategy with the creation of Nestlé Health Science, and we are extending it now to the field of specialised medical skin treatments by setting up Nestlé Skin Health SA.”
Nestlé will continue to be disciplined in driving performance in line with its model of profitable growth and resource efficiency, he added.
Read how the Yorkie chocolate brand helped drive Nestlé to a strong performance in the UK and Ireland here.
Bulcke’s cautious view of the business prospects for 2014 was shared by Paul Wilkinson, chair of the Food Manufacture Group’s Business Leaders’ Forum and Thorntons. Read what three key factors he predicted would put food and drink manufacturers’ profits under pressure here.
