Profits Slump at Nestlé, Expects Tough 2016 Trading Conditions
18 Feb 2016 --- Nestlé’s profits have fallen more than double year-on-year in 2015 and the company has warned that tough trading conditions in 2016 will mean it will be difficult to raise prices of its food and drink products. The world’s biggest food and drinks company reported that its profits fell from 9.1 billion Swiss francs (US$9.2 billion) to 3.7 billion Swiss francs (US$3.73 billion) in the year, after it took a financial hit from selling a stake of the business to L’Oréal as well as being hit by foreign exchange movements.
Its overall sales came in at 88.8 billion Swiss francs ($90 billion), which was below estimates by analysts.
Nestlè, whose brands include Nescafe, Carnation milk and KitKat, reported strong growth in the US, helped by turning around its frozen food business.
Buts its profits in India were hit after it was forced to recall its Maggi noodles brand for five months amid a good scare.
In the key market of China, where Nestlè is battling to meet demanding consumer needs, its performance improved towards the end of the year helped by investment in its Nescafé brand.
Nestlè has struck a deal with Chinese e-commerce giant Alibaba to grow online sales in Chine.
Paul Bulcke, Nestlè chief executive, said: “The shift [in China] has been major from bricks and mortar into the e-commerce space.”
He said the tie-up with Alibaba would allow Nestlè to leverage data to better target its advertising.
Bulcke added: “In 2015 we delivered profitable growth at the higher end of the industry in what is still a challenging market. The profitable growth was on the back of consistent performance in previous years.”
“At the same time we continued to invest for the future with increased support behind out brands and further development of our new platforms in nutrition and health as well as E-commerce.”
“We kept up the focus on portfolio management, turning around our frozen food business in the United States, disposing of non-core businesses and forcing a new partnership to create a leading player in ice cream.”
However, Bulcke warned it would be tough to raise prices of its brands in 2016.
He said: “We anticipate that our trading environment in 2016 will be similar to previous year with even softer pricing.”
In the US, Nestlè said sales of new ranges such as Lean Cuisine and Stouffer’s were strong along with its flagship ice cream brand Haagen-Dazs.
Coffee-mate’s performance in the US was helped by new flavors and packaging, the company said.
Top performers in Western Europe were Nescafe Dolce Gusto and its pet food brands.
France, Germany and the Benelux countries were signalled as the best performing nations.
In Eastern Europe, pet care also performed well, as did Nescafe Dolce Gusto.
Despite the economic and political unrest in Russia, Nestlè said it saw positive growth.
by John Reynolds
