Nestle, the world's biggest food company, reported the slowest annual sales growth in five years, hit by stagnant revenue in China, its second-largest market, and deflationary pressure in Europe.
Revenue gained 4.5 per cent in 2014 excluding acquisitions, disposals and currency shifts, the Vevey, Switzerland-based maker of Nespresso coffee and Maggi bouillon cubes said in a statement Thursday.
That’s the slowest pace since 2009 and was in line with the 4.5 per cent median estimate of 20 analysts in a Bloomberg News survey.
That makes the second year in a row that Nestle reports annual sales growth below the level of its long-term goal.
Revenue in the Greater China region was little changed at 6.64 billion francs (€6.2 billion).
The Swiss maker of Stouffer’s convenience meals has also been struggling with price competition in Europe and is trying to turn around its frozen- food business in North America.
"With organic growth again below the long-term target, it raises the question whether the goal should not be corrected downwards," said Patrik Lang, an analyst at Julius Baer Group in Zurich.
“But it’s still clearly better than what we’re seeing the rest of the sector, which is why investors will still be happy.”
The company said it targets organic growth this year of around 5 per cent and aims to achieve improvements in margins and underlying earnings per share in constant currencies.
Sales growth in the Asia Oceania Africa region was 2.6 per cent, compared with 2013’s 5.6 per cent pace.
“The slower growth in the zone was due to our largest market China and to Oceania,” Nestle said. “We needed to adapt our portfolio to reconnect with the fast-changing expectations of the Chinese consumer.”
Political turmoil in Asia and the outbreak of Ebola in Africa made business there tougher, Nestle said in October.
Weaker demand in emerging markets such as China has led Unilever, the maker of Ben and Jerry's ice cream, to forecast no significant improvement in market conditions in 2015.
Nestle’s frozen-food business in North America weighed on growth in North America, the company said today, adding that it’s continuing efforts to reposition its Lean Cuisine, Hot Pockets and Stouffer’s meals by making them more “organic and ethnic.”
The maker of KitKat bars has been revamping its portfolio to revive sales growth. Bulcke has sold underperforming assets such as PowerBar snacks and the company is seeking a partner for its Davigel European frozen-products unit.
Bloomberg
