Unilever and Nestlé battle against tough market conditions

By Niamh Michail

- Last updated on GMT

Unilever and Nestlé battle against tough market conditions

Related tags Real internal growth Marketing Nestlé

Negative growth in Europe, fragile consumer demand and volatile markets marked the first quarter for Unilever but Nestlé says softer pricing helped it maintain positive growth. 

Unilever saw its growth in Europe fall by 0.6% in the first quarter, the the result of widespread price deflation. 

Although underlying sales grow 4.7% - 8.3% for emerging markets – the Dutch-Anglo company's turnover fell 2% to €12.5 billion, including a negative currency impact of 7.1%

It nonetheless described it as a strong, volume-driven performance for the first quarter. CEO Paul Polman said: “We are maintaining momentum despite a tougher external environment, with all four categories gaining market share.

“With markets remaining volatile, we continue to focus on driving agility and resilience in our business through the key programmes which we set out at the end of last year: net revenue management, zero based budgeting and the next stage in our continued organisational transformation.”

But Nestlé said it saw positive growth in Western Europe, with Germany, Spain, Italy and the UK giving solid performances, but this was due to softer pricing as the Swiss giant also felt the impact of deflation. Russia delivered double-digit real internal growth and organic growth, it said.

Nestlé CEO, Paul Bulcke said: "As anticipated, the first quarter continued the positive momentum in real internal growth, with softer pricing. We gained market share in the majority of our categories and businesses. The trends seen over the last few quarters show the relevance of our investments and allow us to confirm our outlook for the year."​ 

In 2015, however, Nestlé missed sales forecasts and saw net profit fall by more than a third.

Healthy outlook 

According to Euromonitor analyst Lianne van den Bos, many global companies are seeking to give their reputations a health and wellness boost - and Nestlé should consider acquiring healthy brands if it is to keep up with its competitors, she said, pointing to recent healthy acquisitions: Hershey buying meat snack company Krave and Mondelez acquiring the fast-growing free-from brand Enjoy Life Foods. For a company of its size, Nestlé doesn’t actually have that many global brands, she said.

“Nestlé is long overdue a strategic addition to its health and wellness portfolio,” ​she said. “For years now Nestlé has said it wants to be the world’s leading nutrition, health and wellness company. While it still has work to do, from a food portfolio perspective its strategy has worked. Health-related dairy categories now make up the majority of the company’s sales. In fact, while, in 2010, Nestlé’s food portfolio was most reliant on snacks, representing 39% of sales, it has now been replaced by dairy, accounting for 42% of sales.

“Going forward Nestlé could invest freed-up resources in the fast-growing yoghurt category and seek to acquire fast-growing health and wellness brands as well as dairy alternatives.”

Healthy positioning is working well for Unilever. It puts good growth in savoury products down to stronger positioning of natural brands, such as Mealmakers with 100% natural ingredients in Europe. Hellman’s was also boosted by its ‘Real’ campaign and in the UK, Flora margarine spread was the subject of a new marketing campaign that highlighted its plant-based health credentials, and also launched a dairy-free version. However sales of spreads took a hit due to the continued market contraction in developed countries, the company said.  

Meanwhile, Unilever’s premium ice cream brands continued to be the driving force behind the strong momentum seen over the past two years, such as Magnum Double range, Carte d’Or sorbet and Ben & Jerry’s.

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