Nestle cuts sales growth target on sluggish Europe

Thu Aug 8, 2013 2:59am EDT
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By Silke Koltrowitz

ZURICH (Reuters) - Nestle NESN.VX, the world's biggest food group, missed first-half sales forecasts and trimmed its 2013 target on Thursday, after it cut prices in Europe in a bid to lure recession-hit shoppers.

Food groups have long been grappling with weak spending in western European markets and in recent quarters have also seen growth slow in developing countries.

Nestle, the Switzerland-based maker of KitKat bars and Maggi soups, said underlying sales rose 4.1 percent in the first half, lagging a forecast for 4.6 percent in a Reuters poll, and implying a further deterioration from 4.3 percent in the first quarter, mainly due to weakness in Europe.

It lowered its full-year target to around 5 percent sales growth, from 5-6 percent previously.

"Organic growth was somewhat muted, reflecting lower pricing by our markets, as we leveraged softer input costs to meet the expectations of today's more value conscious consumers," the Vevey-based company said.

Nestle said, however, that it hoped the price cuts and investment in its brands would fuel growth in sales volumes in the second half of the year. Marketing spending was up 60 basis points in the first half.

"Disappointing organic growth rate due to weak development in Waters, Beverages and Prepared dishes and cooking aids," Vontobel analyst Jean-Philippe Bertschy said, though he noted the firm had managed to improve its operating margin.

Organic sales strip out foreign exchange swings and the impact of acquisitions and are closely watched by analysts.   Continued...

A Nestle logo is printed by a 3D printer during a display for the inauguration of the system technology centre for the design, development and deployment of their products in Orbe March 25, 2013. REUTERS/Denis Balibouse