Nestle’s sales rise 7.2% in Q1

Nestle, the world’s biggest food group, reported forecast-beating first-quarter organic sales growth of 7.2 per cent on Friday as emerging market demand and price rises helped offset sluggish growth in the developed world. The Vevey-based maker of Nescafe coffee, KitKat chocolate bars and Maggi soup had been expected to post underlying sales growth of 6.6 per cent, according to a Reuters poll of analysts, down from 7.5 per cent growth in 2011. “In many developed markets where consumer confidence is low, the trading environment is subdued whilst in most emerging markets, conditions remain dynamic and rich in growth opportunities,” Chief Executive Paul Bulcke said in a statement. Sales to emerging markets grew 13 per cent compared with just 3.1 per cent growth in developed countries. Nestle said high commodity prices were still a headwind for the first half of the year but predicted a “likely improved raw material environment” in the second half, allowing it to confirm a full year outlook of 5-6 per cent organic growth. It also made its standard forecast for improved margin and underlying earnings per share in constant currencies. “The organic growth shown should convince investors and analysts,” said Notenstein bank analysts in a note. “The price increases it has pushed through are taking their effect now and should have a positive impact on margins. The portfolio of strong, well-known brands with high recognition and product innovation should continue to allow this in future.” Sales including foreign exchange fluctuations rose 5.6 per cent to 21.4 billion Swiss francs ($23.40 billion), meeting average forecasts, with 4.4 per cent of the rise in underlying sales coming from price increases and 2.8 per cent from volume. Nestle said the North American market continued to be hit by weak consumer sentiment, with growth falling in several categories where it hiked prices, including frozen food. But it maintained growth in most of western Europe including Britain, France, Italy, the Iberian peninsula and Switzerland as Nescafe and pet food performed well, while Russian sales were hit by a realignment of distribution networks. French rival Danone reported better-than-expected like-for-like sales growth of 6.9 per cent in the first three months as its key Russian and US markets returned to growth. But Danone, which is the most exposed among big food groups to the euro zone debt crisis with around 40 per cent of sales in the region, warned this week that deteriorating market conditions in Spain would hit the full year. Nespresso, Nestle’s fastest-growing big brand which said on Thursday it had won a patent battle with rivals, delivered underlying sales growth of around 20 per cent, with demand growing around the world. Nestle sales of bottled water staged a revival, with underlying growth of 8 per cent compared to 5.2 per cent in 2011, with a strong performance in North America and double-digit growth of its Pure Life brand aimed at emerging markets. The world’s biggest bottled water company with brands like Perrier and San Pellegrino has seen sales suffer in recent years as hard-pressed consumers have switched to tap water and amid environmental campaigns against the business. Nestle shares, which have risen almost 6 per cent this year compared with an increase of 8.8 per cent for the European food and beverage index, touched a lifetime high of 57.50 francs on Thursday ahead of the results. Nestle did not comment on a deal it is expected to seal this month to buy Pfizer’s infant nutrition business for up to $10 billion to boost its business in China and extend its lead in the world of formula milk for babies.