VEVEY, Switzerland – Frozen food sales in North America were flat for Nestle S.A. in fiscal-year 2018 when compared with 2017, which has company executives stressing innovation in 2019.
“When it comes to frozen meals, we did not have a good year, and we just own up to that,” said U. Mark Schneider, CEO, in a Feb. 14 earnings call. “We’re working intensely to address that situation, and I’m very bullish when it comes to expectations here going forward.”
Frozen pizza performed well, which kept frozen food sales in 2018 on pace with 2017 sales.
“But frozen meals, it was very clear that what we’ve done in prior years was too much of a one-shot type of improvement on the old innovation model, and what we really have to apply now is this continuous improvement, basically hit the market all the time with new and improved products and stay ahead,” Schneider said.
Vevey-based Nestle S.A. overall reported global sales of 91,439 million Swiss francs ($90,875 million) in the fiscal year, which were up 2.1 percent from 89,590 million Swiss francs in the previous fiscal year. Organic sales growth was 3 percent. Momentum in the US and China, as well as in infant nutrition, supported the growth. The net of acquisitions, largely related to the acquisitions of the Starbucks license and Atrium Innovations, increased sales by 0.7 percent.
Underlying trading operating profit was 15,521 million Swiss francs ($15,425 million) in the fiscal year, up 5 percent from 14,771 million Swiss francs. Net profit benefitted from several large one-off items, including the disposal of businesses, and grew by 42 percent to 10.1 billion Swiss francs.
In Zone Americas, fiscal-year sales of 30,975 million Swiss francs were down 0.9 percent from 31,255 million Swiss francs in the previous fiscal year although organic sales growth was 2 percent.
Growth in North America came from Purina pet care, Coffee-mate creamers and Nestle Professional. The infant nutrition business returned to growth in the fourth quarter. The licensed Starbucks business was integrated with strong demand for the coffee products.
In Zone Europe, Middle East and North Africa (EMENA), fiscal-year sales of 18,932 million Swiss francs were up 2.5 percent from 18,478 million Swiss francs. Purina pet care, infant nutrition and Nestle Professional drove organic sales growth of 1.9 percent.
In Zone Asia, Oceania and sub-Saharan Africa (AOA), fiscal-year sales of 21.331 million Swiss francs were up 2.2 percent from 20,878 million Swiss francs. Organic sales growth of 4.3 percent came through innovation in infant nutrition, coffee and culinary. Growth also came in e-commerce.
In Nestle Waters, fiscal-year sales of 7,878 million Swiss francs were almost even with 7,882 million Swiss francs the previous year. Organic sales growth was 2.1 percent. Growth in North America was supported by price increases in the US, which reflected cost inflation in packaging and distribution.
Nestle Waters, a transportation-intensive business, dealt with energy prices, PET prices and distribution costs throughout the year, Schneider said.
“Under the circumstances, the business has done well,” he said. “I think it improved its efficiency a lot and also put in place the necessary price increases so that we are positioned for better development in 2019.”
In Other Businesses, fiscal-year sales of 12,323 million Swiss francs were up 11 percent from 11,097 million Swiss francs. Organic sales growth was 5.7 percent. Nespresso maintained mid-single-digit organic sales growth with strong momentum in North America. Nestle Health Science posted mid-single-digit growth.
In 2019, Nestle expects companywide organic sales growth to be above the 3 percent level achieved in 2018 and underlying trading operating profit margin to be above the 17 percent level accomplished in 2018, Mr. Schneider said. Restructuring costs in 2019 should be about 700 million Swiss francs.