Organic sales growth in fiscal year 2017 was 2.4 percent, which was at the low end of expectations. Fourth-quarter organic sales growth was 1.9 percent.
|Ulf Mark Schneider, CEO of Nestle|
“Clearly, no beating around the bush, we are disappointed about our Q4 organic sales performance,” said Ulf Mark Schneider, CEO, in a Feb. 15 earnings call to discuss results for the fiscal year ended Dec. 31. “It came in somewhat softer than we had anticipated, and as a result of that, our organic growth for the entire year 2017, while it is inside the guided range, came in somewhat on the softer side.”
The 2.4 percent organic sales growth in 2017 follows 3.2 percent organic sales growth in 2016.
“Hence, we fully acknowledge that the incline has become steeper, and so the challenge is certainly a harder one than the one that we looked at last year,” Schneider said of achieving the 2020 goal.
Vevey-based Nestle in fiscal year 2018 expects organic sales growth of 2 percent to 4 percent.
Committed to baby food
The Gerber Life Insurance business is a financially separate affiliate of Gerber Products Co., but it was part of Nestle’s Gerber acquisition from Novartis in 2007. The Gerber Life Insurance business had sales of 840 million Swiss francs ($908 million) in 2017. Nestle said it remains committed to its Gerber baby food business.
Nestle recently announced two acquisitions. Last September, it acquired a majority stake in Blue Bottle Coffee, a specialty coffee roaster and retailer in Oakland, California. Schneider said that business most likely will start counting toward organic sales growth in the fourth quarter of 2018. On Dec. 5, Nestle agreed to acquire Atrium Innovations, a nutritional health products company, from Permira Funds for $2.3 billion in cash. Atrium’s sales in 2017 were expected to reach almost $700 million.
“When that transaction closes toward the end of the first quarter (of 2018), it’ll still be a full year before it’ll contribute to our consolidated group organic growth,” Schneider said.
Nestle in fiscal year 2017 had total reported sales of 89,791 million Swiss francs ($97,088 million), up 0.4 percent from 89,469 million Swiss francs ($96,741 million) in the previous fiscal year. Net divestments reduced sales by 1.9 percent. Net profit of 7,200 million Swiss francs ($7,786 million) in the fiscal year was down 16 percent.
Weak US consumer demand
In Zone Americas (AMS), total reported sales of 28,479 million Swiss francs ($30,794 million) were up 1.2 percent from 28,130 million Swiss francs ($30,416 million) in the previous fiscal year. Organic growth in the United States was slightly negative. Weak consumer demand resulted in stagnant food and beverage category growth. The coffee creamer and pet care categories generated growth in North America, but declines in confectionery and ice cream offset that growth.
In Zone Europe, Middle East and North Africa (EMENA), total reported sales dropped 5 percent to 16,535 million Swiss francs ($17,879 million) from 17,428 million Swiss francs ($18,844 million). Pet care and coffee reported strong results.
Zone Asia, Oceania and sub-Saharan Africa (AOA) had its highest growth in four years. Total reported sales increased 2 percent to 16,224 million Swiss francs ($17,542 million) from 15,904 million Swiss francs ($17,196 million).
Reacting to carbonated water
Total reported sales for Nestle Waters increased 0.2 percent to 7,955 million Swiss francs ($8,601 million) from 7,926 million Swiss francs ($8,570 milion). International premium brands reported high single-digit growth. Regional brands in North America dealt with weak demand and pricing pressure.
“When it comes to water, we have some issues, faced some issues in Nestle Waters North America,” Schneider said. “In particular, I think we were initially a bit slow to react to the rise in carbonated water. So I think we are making good progress here in filling that demand and meeting that consumer demand.”
Nestle Nutrition in the fiscal year had total reported sales of 10,361 million Swiss francs ($11,203 million), up 0.5 percent from 10,326 million Swiss francs ($11,165 million). Nestle’s Other Businesses had total reported sales of 10,237 million Swiss francs ($11,069 million), up 5 percent from 9,755 million Swiss francs ($10,547 million). Nespresso reported consistent mid-single-digit growth with growth in all regions.