Nestle sales climb 9%; company details changes in management

by Eric Schroeder
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VEVEY, SWITZERLAND — Consolidated sales of the Nestle Group reached CHF72.2 billion ($57 billion) during the first nine months of 2005. Real internal growth rose to 5%, while pricing added another 2%, resulting in organic growth of 6%. The company’s core food and beverage businesses achieved real internal growth of 4% and organic growth of 6% in the nine months.

"Our strong growth has continued into the third quarter of 2006," said Peter Brabeck-Letmathe, chairman and chief executive officer. "We are still facing volatile raw material and energy prices, but overall, I feel comfortable in reconfirming our reaching the upper end of our long-term organic growth target of between 5% and 6%, combined with an improvement of the EBIT margin in constant currencies for the full year.

"We have also continued to make progress in our transformation into a nutrition, health and wellness company through our active business portfolio management and the announced changes in our top management."

The changes in top management that Mr. Brabeck-Letmathe spoke of include the addition of a chief technology officer at the executive board level. Werner Bauer, current head of corporate technical, production and research and development, will take on the new role in February 2007. As c.t.o., Mr. Bauer will have oversight for research and development, innovation acceleration teams, technology intellectual property management, innovation partnership management, packaging and design and regulatory. He also will be chairman of the international Nestle Nutrition Council.

Nestle also in February will combine its sourcing, manufacturing and supply chain responsibilities, along with quality management, safety, health and environment, engineering and operations performance into a new operations organization that will be headed by Jose Lopez, current market head in Japan. Mr. Lopez also will be responsible for continuing Operation Excellence 2007, an efficiency initiative under way at Nestle.

By the end of 2006, Nestle said it expects 80% of its food and beverage business will be managed with the Global Business Excellence (GLOBE) processes, data and systems. GLOBE had been led by Chris Johnson, who, with the implementation of GLOBE into one of Nestle’s normal group activities will return to operational management and succeed Mr. Lopez as head of Nestle in Japan. Mr. Johnson will be succeeded in his GLOBE capacities by Olivier Goulin, current head of IS/IT.

Among the product groups, Nestle beverages achieved 8% organic growth during the nine months ended Sept. 30, boosted by good performance of waters, soluble coffee and powdered beverages.

Milk products, nutrition and ice cream also performed well, achieving 5% organic growth. In the United States, CoffeeMate sales improved, while in Europe ice cream sales accelerated.

Nestle ’s European zone reported growth of 2%, as Nescafe, Nesquik, pet care and frozen food all performed well. Despite dealing with poor weather in August, Nestle said ice cream sales in the region grew, reflecting the success of low-fat product launches as well as the relaunch of Movenpick of Switzerland.

In the Americas, growth remained impressive at 7%. There was strong organic growth in frozen food in North America, in pet care, culinary products and ready-to-drink beverages, as well as in Nescafe and biscuits.

"Ice cream experienced somewhat slower organic growth than in 2005, as Dreyer’s continued to focus on improving the balance between its sales growth and earnings performance," the company said. "In the U.S., there was a strong performance in a number of areas, including frozen and chilled culinary products, particularly the Stouffer’s, Lean Cuisine and Buitoni brands, as well as our products tailored to Hispanic consumers and CoffeeMate. Latin America continued to deliver organic growth comfortably above the group average."

Nestle Waters’ business grew 8% during the nine months. North America provided good volume growth and emerging markets continued to deliver double-digit growth.

Nestle said it expects to reach the upper end of its outlook of 5% to 6% organic growth in 2006.

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