Brief

Nestle reports weak 2016 but looks to sweeten 2017

Dive Brief:

  • Nestle said pressure on global food prices weighed on its earnings in 2016, reporting a 6% decrease in net profits to $8.53 billion for the fiscal year, according to U.S. News & World Report. Revenue grew just 0.8% to $89.47 billion.
  • The confection giant also saw double-digit declines in its Chinese unit. 
  • The company, which only releases its earnings once a year, said that organic growth increased 3.2% in 2016. It expects to see increases of 2 to 4% in organic growth for 2017.

Dive Insight:

While Nestle had some problems in Asia and certain European segments, the Switzerland-based company saw sales growth in North America. Organic growth was strongest in the Americas, up 4.2%. While this region met the international company's growth target — which was significantly scaled back in October —  the rest of the world trailed behind.

During a company press conference, Company CEO Mark Schneider said that for 2017, the company is looking to restructure costs considerably. He did not go into many specifics, instead hinting at the company’s history of finding efficiencies when needed.

Part of the company's strategy in the U.S. has centered on growth in its chocolate and confectionery brands, as well as expansion into the high-end premium market. In 2016, Nestle debuted two premium brands, Cailler and Damak, in North America and elsewhere. The company said that its performance in U.S. confectionery was "disappointing" in 2016, caused by stiff competition and low growth in the chocolate space.

More U.S. investments in the sweets segment are coming. Last month, the company announced a partnership with Hostess to create ice cream versions of some of its more iconic treats, like Twinkies, Sno Balls and CupCakes. By working with an up-and-coming brand with a loyal following, Hostess may be able to give its sales a jolt.

The company has also hopped on the better-for-you trend, pledging to reduce sugar in some of its U.S. sweets. Last month, Nestle committed to reduce sugar in its Nesquik product as part of a pledge to reduce sugar across its portfolio. And that may happen in a dynamic way. Last last year, Nestle said it found a scientific breakthrough that will allow for further sugar reduction without impacting taste. The company told Food Dive it was in the process of patenting a hollow and faster-dissolving sugar that could allow a 40% reduction in products. Details were scarce, but the manufacturer told Food Dive they expected it to be used in Nestle's products by 2018.

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Filed Under: Manufacturing Corporate
Top image credit: Nestlé