Nestlé Struggles Amid Changing Tastes and Sluggish Economic Growth

By Brian Blackstone Features Dow Jones Newswires

Nestlé SA said Thursday that first-quarter revenues were largely flat from one year earlier, due partly to weakness in North America, as the consumer goods giant confronts sluggish global growth and changing consumer tastes.

Continue Reading Below

Revenue in the three months from January to March was 21 billion Swiss francs ($21 billion), compared with 20.9 billion Swiss francs in the first quarter of 2016. Organic growth, which strips out the effects of currencies, acquisitions and divestments, was 2.3%.

The results underscore the challenges Nestlé and other consumer goods companies face, including insipid economic growth, difficulties raising prices and consumers increasingly favoring locally grown, organic food.

Weakness in Nestlé's confectionery business, which includes Crunch bars, Kit Kats and Cailler chocolate, weighed on overall organic sales. Analysts had expected some softness due to the late Easter holiday, which pushed some holiday-related spending into the second quarter.

Nestlé Chief Executive Mark Schneider added that the leap year in 2016, which led to an extra sales day in February that year, made annual comparisons harder.

Analysts had expected first-quarter revenue of about 21.3 billion francs, according to FactSet. Organic sales growth was expected by analysts to come in at around 2%.

Continue Reading Below

Organic sales were weak in the Americas, rising by just 0.4%, and they rose 0.8% for developed markets overall. In contrast, comparable sales were up 4.3% in emerging markets, with robust growth in Southeast Asia and parts of Africa.

Nestlé previously targeted 5% and 6% annual organic growth, but Mr. Schneider ditched that target in mid-February, about six weeks after taking the company's helm.

On Thursday, Nestlé reaffirmed it expected organic growth of between 2% and 4% in 2017. A more flexible mid-single-digit objective won't kick in until 2020. The company missed the 5% to 6% target for four years running, through to 2016.

Write to Brian Blackstone at brian.blackstone@wsj.com

(END) Dow Jones Newswires

April 20, 2017 03:24 ET (07:24 GMT)