Nestle sees innovation as the key to progress in Europe

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Nestle has high hopes for new markets and products after it posted forecast-beating 2011 sales growth.

The world’s largest food group, which makes brands such as Nescafe, Perrier, Maggi and Carnation, warned that 2012 would be just as difficult as previous years due to continued economic uncertainties.

Nestle has around 2,000 staff in York, while its Halifax operation employs up to 800 people, depending on the time of year.

The production of After Eight mints is being transferred to the Halifax factory, along with new lines of Rolo and Aero biscuits.

Nestle chief executive Paul Bulcke said in a statement: “It was a challenging year, and we do not expect 2012 to be any easier.”

Underlying sales growth for 2011 was 7.5 per cent, a figure which beat expectations.

Bernstein analyst Andrew Wood said in a note: “Overall, we believe the market will react well to the strong sales results and positive outlook on 2012... However, we remain cautious on sales momentum entering 2012.”

The group reported that absolute 2011 sales fell 4.8 per cent to 83.6bn Swiss francs ($90.5bn), as the rise in the safe-haven currency more than cancelled out underlying growth.

It managed 3.7 per cent underlying sales growth in the tough markets of Portugal, Italy, Greece and Spain and recorded a big surge in margins in Europe as it pushed new products like Dolce Gusto coffee and Maggi spice-filled roasting bags.

“The key to our progress in Europe is innovations,” chief financial officer Jim Singh said.

Analyst Polly Barclay at JP Morgan said: “Nestle should trade at a premium to the sector given its relative resilience in Europe.”

Nestle is growing in emerging markets, which Mr Singh said should account for half of sales by 2020 from 41 per cent last year.

French food rival Danone trimmed its sales growth and margin targets for 2012 on Wednesday, saying tough west European markets would offset strong growth in emerging markets, which now account for more than half of sales.

Anglo-Dutch consumer goods group Unilever sounded a similar tone, saying 2012 will be a difficult year as growth in emerging markets slows and demand in Europe and North America stays flat at best.