Nestlé has lowered its 2017 sales outlook is it comes under further pressure from activist investor Dan Loeb to rejuvenate growth.
The world’s largest food company posted lower than expected organic growth during the first half of the year at 2.3%, slowing from 3.5% for the same period last year.
In a statement, Nestlé said the results didn’t ‘fully meet out expectations’ and that organic growth for the whole year is likely to be in the ‘lower half of the 2-4% range’.
Sales were led by the company’s water, coffee and pet care businesses. Meanwhile, confectionery was the only category with negative growth.
The maker of KitKat is faced with consumer trends towards healthier eating and last month announced it may sell its US confectionery business. Reuters reported that US sweet manufacturer Ferrara Candy Company is set to put in a bid to buy the portfolio.
Nestlé CEO Mark Schneider, who took charge in January, has been attempting to reignite growth after 2016 sales fell to the slowest rate in a decade.
Last month hedge fund Third Point, led buy Loeb, bought a $3.5 billion stake in Nestlé as it ‘recognised a familiar set of conditions that make it ripe for improvement and change’. The fund has proposed that Nestlé offloads its non-core range, sells its stake in cosmetics maker L’Oréal and increases leverage for share buybacks.
With the release of the half-year results, Schneider said: “We are pleased with our value creation progress in the first half of 2017. This includes solid operational improvements as well as portfolio management choices and our decision to increase balance sheet efficiency.
“Organic growth in the first half did not fully meet our expectations. While volume growth remains at the high end of our industry, pricing continues to be soft. Asia and Africa confirmed their positive growth momentum. Western Europe experienced a volume decline, which we consider largely transitory.
“North America and Latin America saw a slight improvement in organic growth, mainly driven by volume. Our coffee, water and pet care businesses confirmed their growth potential with solid first-half results.”
Responding to the Third Point investment, Nestlé unveiled a strategic model for growth which consists of spending on profitable food and beverage categories such as coffee, pet care, infant nutrition and bottled water.
The Swiss company will be encouraged be the performance of its Nespresso brand, which delivered double-digit growth in North America and continues to be a ‘key growth driver for the group’.
Total sales for the first six months of the year were down 0.3% to CHF 43 billion ($44.8 billion) which was put down to the creation of its Froneri joint venture and foreign exchange.
© FoodBev Media Ltd 2024