Nestlé hopes marketing will boost growth

13 August 2009

VEVEY, Switzerland: Nestlé, the world's biggest food company, posted mixed results in the first half of 2009, but its ceo, Paul Bulcke, argued an "increased investment in consumer-facing marketing and R&D" means organic growth will "accelerate over the rest of this year."

The company reported organic sales growth of 3.5% in the first half of this year, and "expects volume-driven organic growth to accelerate in the second half", to a figure of around 4.3%.

Its net profit fell by 2%, to SwF5.1 billion ($4.7bn; €3.3bn; £2.9bn), in H1, with revenues also down by 1.5%, to SwF52.3 billion francs, in this period, with currency effects contributing to the overall decline.

Bottled water sales were impacted both by the downturn and environmental concerns, with volumes sliding by 3.7% after particularly sharp decreases in Western Europe and North America.

Similarly, its nutrition arm registered a 2.4% drop off in volume, although the owner of Kit Kat and Nescafé said all of its sectors saw improved sales in the second quarter compared with the first.

In terms of organic growth, powdered and liquid beverages were up 9.7%, with pet care growing by 9.1%, pharma by 5%, confectionary by 4.3%, nutrition by 1.5%, and prepared dishes and cooking aids by 1%. Jim Singh, its chief financial officer, argued "we are seeing a recovery from a tough period between November and March. We expect this trend of improvement to continue in the second half."

With regard to its brands, Nespresso, the premium coffee range, recorded a 25% uptick in organic revenues, making it the company's best-performing product from January to June.

Nestlé also reported an "increase in R&D and consumer facing marketing expenses" during the first half of this year.

Among the other strategies it has adopted in the face of the recession has been to cut prices in a number of areas, and it is not planning to reverse these changes at present.

However, Roddy Child-Villiers, the Swiss firm's head of investor relations, added it does not currently intend to make any major acquisitions, as "there is nothing available at the right price".

Data sourced from Reuters/Nestlé; additional content by WARC staff