Nestlé performance in Europe surprises analysts

By Jane Byrne

- Last updated on GMT

Related tags Switzerland European union Europe Western europe

Nestlé notes double-digit growth in emerging countries
Nestlé notes double-digit growth in emerging countries
Nestlé’s sales for the nine months to the end of September rose 7.3% to reach CHF60.89bn (€49.24bn), slightly short of expectations, but its positive European performance blindsided analysts.

The Kit Kat and Maggi soups maker noted double-digit growth in developing markets. It also announced volume growth of 4.1%.

"For the year as a whole, in spite of input cost pressures, we expect to slightly over perform against our long term organic growth range of 5 to 6% and continue to strive for a margin improvement in constant currencies,"​ said the CEO of the Swiss food giant, Paul Bulcke.

The food giant had raised prices by 3.2% between January and September.

European business better than expected

Andrew Wood, senior research analyst, at New York based Sanford C Bernstein, said Nestlé’s performance across its regional and global businesses remained very balanced in the third quarter, with Europe “providing the biggest upside surprise to our expectations.”

Nestlé’s growth in the Americas was strong again, he commented, with Latin America being the key driver. And the analyst reckons growth there compensated for softer performance in North America. “We suspect growth in the US was close to zero,”​ added Wood.

The analyst revealed that his team was “intrigued”​ by the slight change in tone from Nestlé's management in terms of guidance for the full year, which he said moved from “confident”​ in H1 to “striving”​ in Q3. “Sometimes these subtle changes can hide some management worry,”​ commented Wood.

Nestlé figures were positive, agreed Jon Cox at Kepler Capital Markets and the Swiss group, he adds also "managed to grow in Europe”​ unlike its peers.

Russia proves tough, French market grows

Nestlé claims it outgrew the European market. “In Western Europe there were market share gains in two thirds of the categories. This was achieved by our continued roll-out of innovations like Nescafé Dolce Gusto and Maggi Juicy Roasting across Europe.”

France was a particular highlight, reported the Swiss group, but it added that 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,”​ notes Nestlé.

In Central and Eastern Europe, Russia continued to be a tough market, added Nestlé. Elsewhere in Eastern Europe, it noted stronger growth with Ukraine achieving good results and the Adriatic region growing more than 10%.

Across the region, Nestlé food categories including soluble coffee, chilled and ambient culinary, frozen pizza, and sugar confectionery “all delivered good levels of growth”​ as a result of what the group termed value adding innovation.

But the ice cream category had a poor season with performance below expectations.

The Nestlé CEO told Reuters earlier this month that the group is aiming for Russia to become its biggest European market by sales, but he did not give a clear time frame. Nestle has been linked to a potential acquisition of Russian baby-food and juice producer Progress.

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