Nestle’s coffee push brews better sales

Nestle’s coffee push brews better sales

Zurich - Nestle SA, the world’s biggest food company, reported first-quarter sales that beat analysts’ estimates, as Nescafe and Nespresso were boosted by marketing to ward off increased competition in coffee.

Nestle’s coffee push brews better sales

Credit: REUTERS

Nestle's logo is pictured at the company's headquarters in Vevey, Switzerland. File picture: Pierre Albouy

Sales rose 3.9 percent on an organic basis, the Vevey, Switzerland-based maker of KitKat bars and Perrier water said in a statement Thursday. Analysts had expected 3.6 percent, according to the median estimate in a Bloomberg survey. Revenue from powdered and liquid beverages - predominantly the coffee business - rose 6.3 percent.

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Nestle’s world-leading coffee business faces a fresh challenge from JAB, which has spent more than $30 billion acquiring assets like Keurig Green Mountain, the maker of the most popular single-serve coffee system in the US. Europe’s biggest company by market value gets about a quarter of its sales from the unit that includes coffee. The good performance in coffee was boosted by advertising, according to Jon Cox, an analyst at Kepler Cheuvreux in Zurich.

“Nestle invested money into marketing in the fourth quarter, which actually dampened group margin in 2015, but is now paying off,” said Jon Cox, an analyst at Kepler Cheuvreux in Zurich. “It’s taking advantage of the uncertain situation among competitors in coffee amid JAB’s rapid acquisitions of multiple businesses.”

Volume-driven

The first-quarter growth rate is the slowest since 2009. Shipments rose 3 percent, Nestle said. Pricing boosted sales by 0.9 percentage point.

Maggi regained market share in India after last year’s product recall though the comparison with the year-earlier period was difficult, Nestle said.

The maker of Gerber baby food confirmed its forecasts for 2016. Nestle said in February it expects organic revenue growth to be similar to last year’s 4.2 percent and below its long-term target because it’s hard to raise prices. Nestle also said at the time it aims to achieve improvements in margins and underlying earnings per share in constant currencies.

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