Nutritional credentials drive growth: Nestlé

Posted by Daniel Palmer on 24th April 2009

Nestlé’s focus on becoming a health and wellness food group is resonating with consumers, their CEO has told investors at their Annual General Meeting in Switzerland.

“The main force behind our performance is our brands,” CEO Paul Bulcke explained. “Their success is increasingly derived from their inherent nutritional credentials. Our Company’s commitment to growing our brands towards consumers is demonstrated by a 7.5% increase in consumer-facing marketing spend in constant currencies.”

Innovation and renovation continued to rise as the company sought to tackle the impact of private label growth and a global economic downturn.

“Taken together, our annual R&D expenditure has increased by 10%, and we are constantly looking to maximise leverage of our R&D platform,” Mr Bulcke said.

“The billionaire brands, more than 70% of our food and beverage sales, remain the key drivers of growth,” he added. “In 2008 many outperformed their markets, driven by our continuing focus on nutrition, health and wellness; by our accelerated targeting of the particular needs of consumers in different economic circumstances; by our significant presence in emerging markets; by around 10% growth with our top 10 customers; and by our multi-channel distribution and multi-price point strategies.”

The world’s largest food group had managed to navigate last year’s inflationary environment by predicting the price hikes before many of their competition, the company suggested.

“On the efficiency side, in 2008 we saw the benefit of our accelerated focus on cost savings,” Mr Bulcke said. “Earlier than others, we anticipated the increase in commodity prices and implemented rigorous cost controls. This helped compensate the impact of these effects on our cost of goods sold. It also benefited our distribution, marketing and administration costs. Through this anticipatory action, we were prepared for a more difficult environment, whilst concentrating our efforts on growth generation.”

The company told investors that they were not prepared to rest on their laurels despite the troubled economic times, planning to accelerate efforts to become a leader in health and wellness.

“Our Company is constantly accelerating and evolving,” Mr Bulcke stated. “We don’t wait for bad times to redeploy our resources, or to otherwise adapt, but we try to anticipate coming trends. This means that we are better positioned to face turbulence, and even storms, and see them through. We are constantly finetuning and engineering our organisation for optimal performance.”

Nestlé remains supremely confident about the future of their business, identifying four growth drivers for the years ahead: nutrition, health and wellness; emerging markets and consumers; the out-of-home market; and premiumisation.”We believe that our strategy places us in a good position, and is all the more appropriate in difficult times. Not only does it give us excellent defensive characteristics, it also creates a platform for profitable growth that has proven itself to be one of the most vigorous in the industry. This will continue to guide and inspire our success through the present economic downturn,” Mr Bulcke concluded.