Nestle’s UK operation faces challenging conditions

The world’s largest food group, which employs over 2,000 staff in sites in York and Halifax, has been hit by deflation in Europe as commodity prices fall and a slowdown in China.

In a break from tradition, Nestle did not report its UK accounts, but it said that conditions in Britain, Germany, Italy and Greece were more challenging.

Its European operation reported 1.5 per cent organic growth and sales of £10.3m.

The group said that relative to the market, this was good growth, driven by innovation and “premiumisation” - taking goods upmarket.

It described the European trading environment as “volatile and intense”, with deflationary pressure increasing during the year and consumer confidence very fragile, reducing the flexibility to price.

The weaker performance in Britain, Germany, Italy and Greece were offset by good performances in France, Switzerland, Austria and the Netherlands, and a recovery in Spain and Portugal.

Nestle reported strong performances in petcare and Nescafe Dolce Gusto across Western Europe and good growth from innovations in several categories, including Nescafe Gold and Azzera premium soluble coffee, Fresh Up and Buitoni Fiesta in frozen pizza, Maggi snacking noodles in ambient culinary and the launch of premium chocolate tablets Les Recettes de L’Atelier.

The group, which makes Yorkie chocolate bars at its York factory, said organic sales, excluding currency swings and acquisitions, rose 4.5 per cent last year.

Nestle signalled in October it was likely to fall short of its five per cent goal.

Chief executive Paul Bulcke called the results solid in what he described as a tough environment and said 2015 will be similar.

“I think in the volatile world we’re living in, that’s appropriate,” he said.

“We are aiming as an organisation for five per cent growth. We’ll see how far we get.”

On a reported basis, 2014 sales fell 0.6 per cent to £62bn, pulled down by negative foreign exchange.

Net profit rose £3bn to £10bn in 2014, helped by price increases, cost-savings and the profit on the disposal of part of Nestle’s stake in L’Oreal.

Nestle hopes to boost margins via cost savings and by implementing a turnaround at its struggling North American frozen foods business and its food operation in China.

The group is planning to raise its dividend by 2.3 per cent.