Nestle sales growth lowest since the 1990s

Nestle (VTX: NESN) announced Thursday a growth of 2.4 percent in 2017 lower than expected and below 2016, which was 3.2 percent, as the company tries to re-position their brand as a healthier choice.

It was the weakest year for the Swiss consumer goods giant since the 1990s, following with a slow growth of 1.9% in the three months to December. Net profit was 7.2 billion Swiss francs compared with 8.53 billion in 2016.

Markets like North America and Brazil, due to deflationary pressures, showed a weaker demand, proving they are still challenging countries for the company. Other areas of Latin America reflected a constant “good momentum”.

“Our 2017 organic sales growth was within the guided range but below our expectations, in particular due to weak sales development towards the end of the year. Our cost reduction initiatives delivered margin improvement ahead of 2017 expectations, in spite of considerable commodity price increases,”  said Mark Schneider, Nestle CEO.

Although, the Swiss company define themselves as one focused on nutrition, health and wellness, many of their products are not in the line of that vision. In food and drinks category, which represent 95 percent of their sales, products range from chocolate to ice-cream and frozen pizza, far from the healthy image they want to sell.

Among other announcements, Nestle said they won’t renew the shareholders agreement for its 23.12 percent L’Oreal stake, but are “committed to maintain our constructive relationship with the Bettencourt family.”

In January the company announced the sell of the US confectionery unit to Ferrero for $2.8 billion in cash. It is estimated that the transaction will be finalised in the first quarter of 2018.

As part of their goal to position themselves as a healthy brand, last December Nestle bought Atrium Innovations, a global leader in nutritional health products. The purchase is due to be completed also by the end of the first quarter.

Moreover, Swiss food giant said earlier this month they are collaborating with Nuritas, a Dublin-based startup to find peptides hidden in foods, which are beneficial to prevent diabetes. 

In the UK there was a return to solid growth with positive pricing, despite a bad start off during 2017. Underlying trading operating profit increased by 2.9% to CHF 14.7 billion, giving hope for a better 2018.

“Organic sales growth is expected to improve in 2018 and we are firmly on track for our 2020 margin improvement target,” said  Schneider.

Shares were down 2.51 percent, trading at 75.38 CHF, as of 11:30 (GMT).

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