Nestle's first quarter sales growth undershot rival Danone's after some retailers in Asia cut inventories back to match poor demand, and the destruction of a key Middle East factory in Syria slowed supplies. In Europe, a cold spring hit consumption of bottled water and ice-cream, while a horse meat scandal and pizza and chocolate egg recalls in the region turned off consumers already counting pennies in austere conditions.
"Organic growth (is) likely (to) come in at the lower end of our 5-6 percent guidance," investor relations head Roddy Child-Villiers told a conference call. Sales at the world's largest food company rose 4.3 percent to 21.9 billion Swiss francs ($23.52 billion), below an average estimate of 22.6 billion in a Reuters poll. Sales growth in Asia, Oceania (Australia and New Zealand) and Africa (AOA) slowed to 4.4 percent overall, from 8.4 percent in full-year 2012. They were slowed further by shortages in Nido milk powder, Maggi bouillons and Crelac infant cereals after a mortar shell destroyed a major production plant in Syria.
"The most immediate impact of the slowdown has been on our downstream distributors who have found themselves with too much stock," Child-Villiers said, adding this stock had to be dispersed before order levels could normalise. Nestle, which makes Kitkat chocolate bars and Nespresso coffee pods, said consumer sentiment remained subdued in Europe, where volume growth was partly offset by falling prices. Sales in the region grew 1.5 percent to 3.7 billion francs.
Nestle's bottled water business grew only 1.8 percent, hit by the late arrival of spring that also weighed on ice-cream. Business in North America is improving as the pizza category returned to growth and soluble coffee brand Nescafe performed well, the group said. Overall sales in the Americas increased 5.3 percent to 6.6 billion francs.