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Strong first-half organic growth and EBIT margin improvement, Full-year outlook reconfirmed

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Vevey, Switzerland,
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  • Group:
    Sales of CHF 55.3 billion, 6.1% organic growth, 4.6% real internal growth
    EBIT of CHF 8.4 billion, +13.6%; EBIT margin 15.1%, +80 bps1, +70 bps in constant currencies
    Earnings per share up 13.5% to CHF 1.60
  • Food and Beverages:
    Sales of CHF 51.0 billion, 5.7% organic growth, 4.2% real internal growth
    EBIT of CHF 6.7 billion, +10.6%; EBIT margin 13.0%, +60 bps reported and in constant currencies
    Consumer-facing marketing spend up over 14% in constant currencies

Paul Bulcke, Nestlé CEO: “The Group’s very successful first-half performance is due to the excellent execution of our proven strategies in all parts of the world, covering the full range from premium brands to value-priced offerings, combined with the ongoing successful implementation of Nestlé Continuous Excellence. We have increased investment in our brands, people and capabilities and have prepared the company for a more challenging second half, which allows me to reconfirm our earlier full-year guidance for Food and Beverages: organic growth of around 5% combined with an increase in EBIT margin in constant currencies.”

Vevey, 11 August 2010 - The Group achieved organic growth of 6.1% and an EBIT margin improvement to 15.1%, an increase of 80 basis points1. The Group’s Food and Beverages business achieved 5.7% organic growth, built on a solid foundation of growth both in emerging markets as well as in Western Europe and North America. This growth represents an acceleration over the corresponding period in 2009, particularly in Europe as well as in Asia, Oceania and Africa. This top line performance was combined with a 60 basis points EBIT margin improvement in Food and Beverages.

Organic growth for all Food and Beverages operations was 5.3% in the Americas, 3.6% in Europe and 10.4% in Asia, Oceania and Africa. The Group’s emerging markets continued to achieve over 10% organic growth. BRIC countries’ combined performance was even stronger.

Key growth drivers included deeper distribution in emerging markets in support of a further roll-out of our value-priced, popularly-positioned products, and the continued success of premium products in both developed and developing markets. Recent innovations across all categories, combined with increased investment in consumer-facing marketing, were key to strengthening the Group’s market positions.

The leverage effects from our growth and scale as well as the ongoing efficiency drive under Nestlé Continuous Excellence contributed to the improvement in our EBIT margin, even after increased investment in the business to improve our performance in a sustainable way.

First-Half Results

The first-half results reflect our focus on delivering total performance in all categories and operations.

  • In the first half of 2010, the Nestlé Group’s organic growth was 6.1%, including real internal growth of 4.6%. Foreign exchange impacted sales by -1.5%, whilst acquisitions, net of divestitures, added 1.3%. Overall, Group sales increased by 5.9% to CHF 55.3 billion.
  • Food and Beverages’ organic growth was 5.7%, with real internal growth of 4.2%. The foreign exchange impact was -1.5% and acquisitions, net of divestitures, added 1.4%. Overall, Food and Beverages’ sales increased by 5.6% to CHF 51.0 billion.
  • The Group’s EBIT margin increased by 80 basis points like-for-like, or 70 basis points like-for-like in constant currencies, and by 100 basis points reported, to 15.1%. For Food and Beverages, the improvement was 60 basis points to 13.0%, reported and in constant currencies. We achieved this higher EBIT margin whilst, at the same time, increasing our Food and Beverages consumer-facing marketing spend by over 14% in constant currencies.
  • The cost of goods sold was lower by 160 basis points like-for-like (180 basis points reported). Savings from Nestlé Continuous Excellence were in line with our CHF 1.5 billion full-year target, and more than compensated input cost pressures. The delivery of the planned savings for the full year will contribute to the Group meeting its full-year EBIT margin targets in a more challenging input cost environment during the second half.
  • Distribution costs fell by 40 basis points, despite higher oil-related costs than in the first half of 2009, as a result of distribution synergies across operations in all three Zones, as well as Nestlé Waters’ continued efforts to optimise its distribution structures.
  • Administrative costs were down by 20 basis points, reflecting the roll-out of Nestlé Continuous Excellence to areas beyond operations.
  • Earnings per share rose by 13.5% from CHF 1.41 to CHF 1.60.
  • Net profit was CHF 5.5 billion, up 7.5%.
  • The Group’s operating cash flow was CHF 5.8 billion as a result of the normalisation of our working capital levels.

Business Review

Zone Americas

Sales of CHF 16.3 billion, 6.1% organic growth, 3.1% real internal growth; EBIT margin 15.1%, -10 basis points

  • In North America, the Purina PetCare business continued to perform well, accelerating in the first half. Beneful grew double-digit, whilst ONE and Dog Chow achieved mid to high single-digit growth. In confectionery, the Wonka extension into chocolate continued to drive growth, as did Nescafé Clásico in soluble coffee. The frozen prepared meals category as a whole continued to suffer from weak consumer demand. While Stouffers’ and Hot Pockets improved, Lean Cuisine continued to decline in a very challenging competitive environment. A new Lean Cuisine range was launched in June and we expect improvement by the end of the year. The frozen pizza business, acquired in March, performed particularly well, especially the DiGiorno brand, which achieved about 14% organic growth. In ice cream, we saw good growth from Häagen Dazs and Skinny Cow.
  • In Latin America, growth accelerated during the second quarter of 2010 to achieve double-digit organic growth in the first half. The biggest categories in the region, dairy and chocolate, both performed well. Dairy saw good growth across most of the region, particularly in Brazil and the Austral-America region, as well as in the Dairy Partners of America joint venture with Fonterra. Chocolate had a strong start to the year and a successful Easter season in Brazil and Mexico, as well as in smaller markets. The Maggi culinary business and Nescafé also both made good progress in their key markets.
  • Compared to the first half of 2009, the EBIT margin was down 10 basis points to 15.1% of sales. This was mainly due to weak demand for frozen food in North America. There was a positive contribution to the margin from a good delivery of savings and strong growth in the Zone. We continued to increase our brand investment.

Zone Europe

Sales of CHF 10.7 billion, 2.2% organic growth, 1.3% real internal growth; EBIT margin 11.9%, +10 basis points

  • In Western Europe, we achieved positive real internal growth in all key markets. Our broad-based performance was achieved through a focus on increasing distribution, improving customer service and accelerating innovation and renovation. In Southern Europe, we achieved positive growth in Italy and the Iberian region and, in Eastern Europe, Poland and the Ukraine were strong performers. In Russia, we experienced good performances in many categories although ice cream and confectionery remained soft.
  • The ice cream market had a slow start to the season in Western Europe, but otherwise there was a positive evolution across the Zone’s portfolio. Soluble coffee delivered good growth, with Nescafé Dolce Gusto continuing to build momentum and take share in its segment of the market. The culinary chilled and frozen food segments both performed well, particularly Herta in chilled food, and Buitoni and Wagner pizzas in frozen food. Ambient culinary, predominantly Maggi, gained share in its biggest market, Germany, and its Juicy Chicken range continued to build share across Europe. In chocolate, KitKat performed well across the Zone. PetCare continued its good momentum in the Zone, with mid single-digit organic growth, and good performances in Russia, Spain, and France amongst others, as well as strong performances from premium brands such as Gourmet, Friskies, ONE and ProPlan.
  • The EBIT margin increased by 10 basis points to 11.9%. This reflects a good delivery of savings from Nestlé Continuous Excellence, as well as lower raw material costs than in the first half of 2009. This was achieved despite increased advertising and promotional investment.

Zone Asia, Oceania and Africa

Sales of CHF 8.6 billion, 9.0% organic growth, 7.6% real internal growth; EBIT margin 16.9%, +20 basis points

  • The emerging markets in Zone Asia, Oceania and Africa achieved double-digit growth, with strong performances across the Zone. Highlights were the South Asia region, including India, the Indochina region, including Vietnam and Thailand, the Central/West Africa region, Indonesia and China. Growth in Oceania and Japan was flat.
  • There were strong performances by most categories. Nido and the other milk brands were back on a good growth trajectory after a tough year in 2009. Ambient culinary, Maggi, also grew double-digit, due to a continued extension of its distribution, as well as successful innovation such as powdered bouillon cubes. Both powdered and ready-to-drink beverages made good progress, under brands such as Milo, Nestea and Nescafé. Soluble coffee had strong momentum in emerging markets and performed well in Japan, particularly due to the roll-out of the Nescafé Barista coffee system there. Chocolate continued to enjoy double-digit growth in emerging markets, driven partly by the successful implementation of its popularly positioned products model, including Nestlé éclairs in India, which are the lowest priced products in Nestlé’s portfolio.
  • The EBIT margin increased by 20 basis points to 16.9%, reflecting the growth leverage in the more profitable categories. This was enabled by increased investment in brands and distribution.

Nestlé Waters

Sales of CHF 4.7 billion, 2.5% organic growth, 3.0% real internal growth; EBIT margin 8.4%, +10 basis points

  • The water market in the developed world returned to growth after a couple of years in which consumption fell. In the emerging world, robust growth continued, and we achieved near 20% organic growth. The Group’s market share performance was good around the world.
  • We achieved positive real internal growth in both North America and Europe. In North America, Nestlé Pure Life continued to perform well, and there was an improvement in growth from regional waters such as Poland Spring. In Europe, we achieved positive growth in a number of markets, including France and Great Britain, despite the poor start to summer. The international brands, especially S. Pellegrino and Perrier, also had a strong start to the year globally.
  • The EBIT margin increased by 10 basis points to 8.4%. This reflects the faster growth of emerging markets, as well as the strong performance of the international brands. Raw material costs were higher than in the first half of 2009, but this was compensated by savings from Nestlé Continuous Excellence, including in structural costs, and the cost benefits of light-weighting bottles.

Nestlé Nutrition

Sales of CHF 5.3 billion, 6.2% organic growth, 5.2% real internal growth; EBIT margin 19.0% +160 basis points

  • Infant nutrition had a good start to the year, with positive growth in all zones and double-digit in many emerging markets, including Russia, China, the Middle East and Africa. The three segments, infant formula, baby food and infant cereals, all contributed with cereals being particularly strong. Key to the performance was continued R&D-led innovation, such as infant cereals with probiotics and infant formula that contributes to alleviating colic.
  • Healthcare nutrition also gathered momentum over 2009, particularly in emerging markets but also in developed markets such as France and Spain, with the focus on core strategic platforms, including paediatrics and critical care. Our Jenny Craig weight management business saw good growth in its US home delivery business, but visit levels at its centres remained a drag to performance. It is early days for the French and British roll-outs but first indications are positive.
  • The EBIT margin increased by 160 basis points to 19%. This performance was achieved by a combination of higher growth than in the first half of 2009, structural reorganisations completed last year, savings from Nestlé Continuous Excellence, product rationalisation in certain divisions, and the achievement of synergies from acquisitions. This improvement was achieved whilst increasing brand support.

Other Food and Beverages

Sales of CHF 5.4 billion, 10.3% organic growth, 8.9% real internal growth; EBIT margin 18.6%, +250 basis points

  • Nestlé Professional continued to build on the positive momentum seen already in the first quarter of 2010, with emerging markets driving the growth. The strategic repositioning of the beverages division as a solutions provider is already showing signs of its potential to drive greater value in our relationships with our customers. The food business also picked up momentum, with China, Latin America and Europe performing well.
  • Nespresso had another strong period, with over 25% organic growth and sales above CHF 3 billion on an annualised basis. The business continued to enjoy double-digit growth in its more established markets, such as Switzerland and France despite a changing competitive environment, and broadened its footprint in many other parts of the world. The boutique development is gathering pace, with about thirty to be opened in 2010: from Shanghai to New York, from Miami to Cape Town. At the same time, the investment in capacity continues, with an extension in Avenches that will bring the total investment at the site to CHF 400 million, doubling its capsule capacity by 2012.
  • Cereal Partners Worldwide grew its global market share, with a strong performance in many emerging markets, as well as in developed markets such as Australia and France. Beverage Partners Worldwide also achieved positive growth in the period.
  • The segment’s EBIT margin increased by 250 basis points to 18.6%, with the main constituents all contributing. Nespresso had a particularly strong performance, and Nestlé Professional continued to benefit from its drive to improve its cost base and reduce under-performing business lines.


Sales of CHF 4.3 billion, 11.1% organic growth, 9.2% real internal growth; EBIT margin 39.9%, +530 basis points, +210 basis points like-for-like.

  • There was a strong performance by all the constituents. Alcon’s like-for-like EBIT margin improvement excludes the positive impact of no longer being allowed to depreciate the Alcon assets held for sale in 2010 by IFRS 5.

Corporate highlights of the first half of 2010

  • We announced the sale of our remaining holding in Alcon for around USD 28 billion and we expect to complete the transaction in the third quarter of 2010.
  • We completed the acquisition of the Kraft pizza business and, shortly after the period under review, acquired Vitaflo, a global provider of clinical nutrition products based in the UK. We also acquired the leader in instant noodles and dehydrated seasonings in the Ukraine under the Mivina brand.
  • We established a joint venture with Dashan, the leader in bottled water in China’s Yunnan province.
  • New facilities were inaugurated in various emerging markets: a Research and Development centre for biscuits and cereal-based snacks in Santiago de Chile; a facility devoted to manufacturing powdered milk and confectionery products in Dubai; and a water bottling factory in Poland. Furthermore, we expanded our milk processing facilities in Indonesia.
  • We announced several emerging market investments: USD 390 million in Mexico and CHF 150 million in the Equatorial African Region, both over a period of three years. Furthermore, we will invest CHF 60 million in the construction of a new culinary factory in Russia and CHF 98 million in the construction of a new dairy factory in the Philippines.
  • Jenny Craig’s weight management programme was launched in France and in the UK.
  • We completed our CHF 25 billion three-year Share Buy-Back Programme and launched a new CHF 10 billion Share Buy-Back Programme.


The Group’s organic growth and EBIT margin in the first half, combined with the positive effect of our continued investment in the business, allows us to reconfirm our earlier full-year guidance for Food and Beverages: organic growth of around 5% and an EBIT margin improvement in constant currencies over last year.


H1 2010 sales and EBIT margin overview

  Jan.-June 2010
in CHF millions
Jan.-June 2010
Organic Growth (%)
EBIT Margins
Jan.-June 2010 Change vs. Jan.-June 2009
By operating segment
Food and Beverages
  - Zone Americas
16’302 6.1 15.1%  -10 bps
  - Zone Europe 10’692 2.2 11.9%  +10 bps
  - Zone Asia, Oceania, Africa 8’598 9.0 16.9%  +20 bps
Nestlé Waters 4’731 2.5 8.4%  +10 bps
Nestlé Nutrition 5’251 6.2 19.0%  +160 bps
Other Food & Beverages 5’429 10.3 18.6%  +250 bps
Nestlé Food and Beverages 51’003 5.7 13.0%  +60 bps
Pharmaceutical products (incl. Alcon) 4’341 11.1 39.9%  +210 bps1
Total Group 55’344 6.1 15.1%  +80 bps1
By Product
Powdered and liquid beverages 10’112 8.4 22.0%  +20 bps
Water 4’735 2.5 8.4%  +10 bps
Milk products and ice cream 10’126 5.6 11.5%  +50 bps
Nutrition 5’253 6.2 19.0%  +160 bps
Prepared dishes and cooking aids 8’753 3.4 11.3%  -90 bps
Confectionery 5’497 8.4 12.0%  +70 bps
PetCare 6’527 5.1 17.6%  +190 bps
Pharmaceutical products (incl. Alcon) 4’341 11.1 39.9%  +210 bps1
Total Group 55’344 6.1 15.1%  +80 bps1
Nestlé Waters, Nestlé Nutrition and Other Food & Beverages (including Nestlé Professional) are not included in the Zones. The slight difference in the figures for water and nutrition between the “Sales by operating segment” and “Sales by product” tables is due to the fact that some water and nutrition products are also sold by operating segments other than Nestlé Waters and Nestlé Nutrition.

1 Like-for-like excluding the positive impact of no longer being allowed to depreciate the Alcon assets held for sale in 2010 by IFRS 5 (CHF 139 million).

Related documents published today:
2010 Half-Yearly Report (pdf, 207 Kb)
2010 Rapport semestriel (pdf, 219 Kb)
2010 Halbjahresbericht (pdf, 226 Kb)

    Media Robin Tickle Tel.: +41 21 924 22 00  
    Investors Roddy Child-Villiers Tel.: +41 21 924 36 22