Nestlé misses first-half sales forecasts despite price cuts in recession-hit markets

Underlying sales growth at Nestle missed forecasts in the first half and lagged the performance of key rivals, prompting the world's biggest food group to cut its sales goal as price erosion continued in Europe.

“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 group said in a statement today, lowering its full-year target to around 5 per cent sales growth, from 5-6 per cent previously.

Food groups have been grappling with lower growth in emerging markets, where Nestle’s growth rates have slowed to a single-digit pace for several quarters now, and gloomy consumers in recession-hit Europe.

Nestle said substantially increased investment in its brands had delivered stronger volume growth momentum it expected to continue in the second half. Underlying sales growth slowed to 4.1 per cent in the first half, and implying a further slowdown from 4.3 per cent in the first quarter, mainly due to a weaker performance in Europe.

“Disappointing organic growth rate due to weak development in waters, beverages and prepared dishes and cooking aids. Slowdown in the emerging markets to 8.2 per cent (from 8.4 per cent in the first quarter),” Vontobel analyst Jean-Philippe Bertschy said.

“By contrast, Nestle positively surprised at the profitability level with a 20 basis point margin improvement, we were expecting a flat development,” he said.