Nestle outperforming frozen food market

by Monica Watrous
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Nestle frozen foods, Lean Cuisine Marketplace, Stouffer's Fit Kitchen
Nestle S.A.’s frozen food business is gaining steam behind the repositioning of Lean Cuisine and Stouffer’s brands.

VEVEY, SWITZERLAND — Nestle S.A.’s frozen food business is gaining steam behind the repositioning of Lean Cuisine and Stouffer’s brands. Executives said the products are outpacing the market and driving recovery in the U.S. frozen meals category.

“If we start talking about our U.S. frozen range, as you know, we did a lot of work in order to renovate, repackage, reformulate, reposition our frozen food franchise, and we are happy to see that the results are coming,” said Francois-Xavier Roger, chief financial officer, during an Oct. 16 conference call with financial analysts. “We have been positive for seven months in a row now, month on month in growth for the frozen food business in the U.S., and if we look at the third quarter of the year, we were a positive and even high single digit in growth against the same period of last year.”

Nestle, which in recent years had hoped to simply stabilize the frozen business, now looks to continue driving growth going forward.

Paul Bulcke, c.e.o. Nestle
Paul Bulcke, c.e.o. of Nestle

“We're not going for stability here; we're going for growth,” said Paul Bulcke, chief executive officer of Nestle. “We have leading positions; we have the best knowledge and the best development center there to really go and link that category, all the brands, with the consumer expectations.

“And actually it's very strange that the frozen food was under pressure over the years because there's no better category to answer exactly what the consumer is asking for, which is clean labeling.”

With the opening of a frozen food research and development center in Solon, Ohio, earlier this year, Nestle is committed to aligning its products with consumer trends.

“I think what we have to do there in that category is stay always sharp and connect permanently with the consumer,” Mr. Bulcke said. “We lost it a little bit because the consumer has moved dramatically fast, called the millennials, but I think we are now there and have the capabilities to stay really attuned with what they expect now.”

Despite gains in frozen food, Nestle’s overall nine-month sales declined 2.1% to 64.9 billion Swiss francs ($68 billion), reflecting the negative impact of foreign currency translation and two “exceptional events” in the third quarter, which included a recall of Maggi noodles in India and a rebate adjustment for Nestle Skin Health. Because of these factors, Nestle’s organic growth for the period slowed to 4.2%, which included 2% real internal growth and 2.2% pricing.

“We have made good progress in many businesses and geographies,” Mr. Roger said. “I think it demonstrates the health of our underlying business fundamentals. It demonstrates our capacity to innovate. It demonstrates our capacity to grow in difficult markets and in difficult environments and our capability to turn around businesses whenever we need.”

For the full year, the company expects to deliver organic growth of 4.5%, down from its previous target of 5%, with improvements in margins and underlying earnings per share in constant currencies and capital efficiency.
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