Food giants adapt in Europe

30 May 2012

BRUSSELS: Major food companies like Nestlé, Heinz and Unilever are adapting their strategies in Europe, reflecting the challenging consumer climate.

Nestlé, the food group, is adopting strategies it has utilised in fast-growth markets like South East Asia, where the firm rolled out single-sachets of Nestea and Nescafé costing around 10¢.

Instant noodles have been a particular success for the Swiss company, and are being rolled out in many European outlets as part of a plan to launch more "popularly positioned products", like Nescafé instant coffee sticks, priced at under €2 in France.

"This year will be a big challenge with some economies in recession," Laurent Freixe, Nestlé's head of Europe, told the Wall Street Journal in an interview.

"There are unemployed young people, students, single parent families, and pensioners. These people are generally living on a lower income, and their budgets are being stretched. We can provide them with relevant options."

Another obstacle to brand owners in the region is the popularity of private label, which saw growth more than doubling that of Nestlé's 4% lift in European sales in 2011. "We expect it to continue at the same rate this year," Freixe said.

Unilever's sales expanded by just 0.7% in Europe last year, and it too has rolled out cheaper lines like the Knorr Economica bouillon cube, priced at 60% less than the normal line. It will also sell more lines costing €1 in the eurozone and £1 in the UK.

"With around one in five people now officially living beneath the poverty line in countries like Spain and Greece, it's critical that we find new solutions to ensure that people across the region continue to enjoy our brands, while keeping in control of their household budget," Matt Close, Unilever's head of European marketing, said.

Heinz has similarly rolled out small and larger size formats of its Ketchup tomato sauce brand in Europe, reflecting what said David Moran, its European CEO, called "changing definitions of value.

"Heinz Ketchup is always the company's top investment choice and that's absolutely true in Europe. We're winning hugely here and we see enormous upside and have the richest innovation pipeline in a decade," he added.

"Interestingly, because of our innovation and increased marketing, retailer brands are not growing across Europe in the ketchup category and of course, that's in stark contrast with virtually all other categories in Europe."

Elsewhere, Kraft, the parent of Cadbury and Oreo, is responding to softening demand "across the board" in the region by attempting to balance its "pricing and volume" mix, Irene Rosenfeld, its CEO, argued.

"Without a doubt, our categories are softer than they had been as a result of the macro-environment," she said. "We worked very hard to make sure that we've got the right investments in the right countries behind the right brands. And it seems to be serving us quite well."

Data sourced from Wall Street Journal; additional content by Warc staff