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Healthy performance for nutrition-focused Nestlé

By Catherine Boal , 22-Feb-2007

In a year dominated by acquisitions and changes within its operational structure, Switzerland-based food group Nestlé has still exceeded expectations with full-year organic growth boosted by the company's focus on nutrition, research and core brands.

Sales at the group rose to CHF98.5 billion (€60.5bn) while organic growth was 6.2 per cent and net profit was up 13.8 per cent to CHF9.2 billion (€5.6bn).

 

 

 

The company spent the year shifting focus to strengthen its nutrition, health and wellness portfolio with the acquisitions of Australian cereal business Uncle Tobys, weight management company Jenny Craig and the nutrition group Novartis.

 

 

 

In addition, Nestlé increased its marketing and administration spend by 6.3 per cent last year as well as upping its investment in research and development 16 per cent to CHF1.7 billion (€1.04bn).

 

 

 

Chairman and CEO Peter Brabeck-Letmathe said: "We are seeing the benefits of the Group's transformation into a nutrition, health and wellness company, with stronger innovation and branding, as well as improved efficiency.

 

 

"Our competitiveness was further boosted by higher spending on marketing and R&D, the roll-out of GLOBE and shared service, as well as our commitment to savings programme."

 

 

As well as delving further into nutrition, Nestlé has been reorganising operations in its confectionery sector in order to increase profitability after lacklustre sales of some core products.

 

 

 

The owner of the ailing Lion brand teamed up with cocoa processor Barry Callebaut last month to hand over facilities in Italy and France and, at the end of 2006, shifted production of the Smarties and Black Magic brands from the UK to mainland Europe while investing £20 million (€29.8m) in its York factory.

 

 

 

With sales of CHF11.4 billion (€7bn) last year, Nestlé's chocolate, confectionery and biscuits sector had organic growth of 2.6 per cent and real internal growth of 0.5 per cent.

 

 

 

The KitKat brand was singled out by the company as a particularly strong product worldwide and Nestlé attributed its popularity to the consumer trend towards lighter chocolate confectionery.

 

 

 

In terms of the European market, Italy and the Iberian peninsula performed well but the UK and Germany confectionery sectors were weaker and business was down in the declining US market.

 

 

Nestlé predicts organic growth of between 5 and 6 per cent during the coming year in spite of "continued strong input cost pressure, especially on agricultural raw materials and more investment in brands, R&D and additional capacity aimed at further accelerating the Group's transformation into a nutrition, health and wellness company."

 

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