Nestle Sets Sights on Emerging Markets

Feb. 21, 2010
'Over the next ten years a billion new emerging customers will be able to buy our products every day,' Nestle says.

Nestle, the world's biggest food company, on Feb. 19, posted a 42% drop in its 2009 net profit and set its sights on one billion new customers in emerging markets over the coming decade.

The profit of 10.4 billion Swiss francs (US$ 9.6 billion) marked a retreat to the Swiss group's performance in 2007, but was largely in line with analyst estimates.

"2009 was interesting but turbulent and challenging," chief executive Paul Bulcke said, adding that he was "responsibly optimistic" for 2010 as the food giant targets growth despite overall "economic uncertainty."

"The fire is out but we still have to put our house in order," he said.

In 2008, Nestle's net profit was boosted by a one-off 9.2 billion Swiss franc earning on the sale of part of its stake in eye care specialist Alcon, affecting the comparison with last year. Sales in 2009 declined slightly from the 109.9 billion Swiss francs reported in 2008, a boom year, to 107.6 billion Swiss francs in 2009.

The company said its business had delivered strong organic growth -- a measure of performance minus the impact of sell-offs and acquisitions. "With organic growth of 4.1% achieved in last years challenging environment, we were able to grow substantially faster than our industry," Bulcke said.

The group reported sales growth in its core food and beverage business across most regions, including in its two biggest markets, the Americas, especially the United States, and Europe. However, in Europe, organic growth reached just 0.3% and its traditional developed markets were again outstripped by growing demand in Asia and the Pacific.

Nestle executives underlined they were accelerating into new territory, investing in facilities like big broth plants in China or instant coffee in Mexico and adapting to local tastes.

"In the last three years there's been a quite dramatic acceleration in investments," the group's director for Africa, Oceania and Asia, Frits van Dijk, said.

Bulcke said: "Over the next ten years a billion new emerging customers will be able to buy our products every day."

While Nestle has achieved double-digit growth in China and Brazil in 2009, it owns 26 plants in Africa, outpacing other regions in terms of investment in production lines over the past two years, van Dijk said. "It's not only about China, it's a broad-based plan," he added.

The group was trying to incorporate local crops, such as sorghum and millet, into its products. "We're really penetrating in rural areas," van Dijk added.

The weak link in the 2009 results was again the bottled water division -- a product mainly focused on Europe and the Americas -- with a decline of 1.4% despite a pick up in demand in the fourth quarter.

The group proposed a 14.3% increase in its dividend payment to shareholders.

Nestle's profits for 2010 are likely to be boosted significantly following Swiss pharmaceutical company Novartis's decision last month to buy the outstanding stake in Alcon.

Copyright Agence France-Presse, 2010

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