Nestlé has the smallest expansion in 20 years

The sales growth of Nestle did not fall as steeply as the mountains that surround the Swiss group''s headquarters in Geneva. But, still, the slowdown last year was breathtaking-especially to Mark Schneider, your new CEO. The largest food and beverage company in the world has been only 3.2% organic growth in 2016, the smallest in at least two decades.
Largely a result of deflation and the weakness of the global economies, the huge and unexpected slowdown shows the challenge that the new Commander of Nestlé will face to reorganize a huge company that produces food for babies to capsule coffee and chocolates.
Schneider says that organic growth last year was at the high end of the industry, but "Speaking bluntly, he was less than expected". The profit before taxes was also weaker than expected, at 12.5 billion Swiss francs against 11.8 billion francs in 2015.
The slowdown is important because the "Nestlé model" relies on a strong sales growth and leverage the group size. But it was difficult to sustain this model in an era of deflation and economic turbulence, and also with consumers replacing processed foods for healthier options.
Even so, the German Schneider proved adamant yesterday in your first public appearance since assuming the post in position that organic growth will be the parameter by which your mandate will be judged. "The organic growth does a lot of good things for a company."
The company''s history shows that "sooner or later, the guys who persistently expanded the business did well," he said. "The guys who followed the model of the cuts sooner or later had to go," added Schneider, citing the example of Valeant pharmaceutical company.
For this year, Nestle expects organic growth of somewhere between 2% and 4%, which Schneider sees as "prudent" given the global macroeconomic volatility and "a scenario that in some ways is still deflationary".
In the long run, your goal is "an organic growth in the intermediate range of a digit" until 2020, which is more or less the reaffirmation of the historical aspiration of the Nestlé annual sales growth of 5% to 6%.
At the same time, Nestle wants to obtain efficiency gains to improve profitability and expect to have restructuring costs of 500 million francs this year, compared to 300 million francs from 2016.
The caution of Schneider at least reassures investors, says Celine Pannuti, analyst at JP Morgan. "If you work with operational efficiency and growth, and when the time''s appropriate you make a big purchase, this seems to be a sensible strategy."
Schneider said that special attention will be given to the global market of coffee-which offers a fast growth and high demand for premium products such as Nestle''s Nespresso coffee system. Overall, Nestlé dominates that market, but she is weak in the United States and faces stiff competition from the JAB, the billionaire family''s investment group, which has already invested Reimann $30 billion in recent years in creating an empire of coffee. The product accounts for almost a fifth of Nestlé recipes.
In a broader perspective, Schneider hopes to increase the "medical profile" of Nestlé products, expanding the business with skin care products and your source "Division of health science", leaving the Swiss group closer to become a drug company. "This is the era of health care dictated by the consumer. People think they need to take responsibility for your own health, "he said.
But Schneider countered allegations that the company may move to the pharmaceutical industry. Nestlé "don''t know much about the fight against cancer. We are essentially a consumer products company ". In addition, your own size-sales last year totaled nearly 90 billion Swiss francs-means that "even though I bought the largest pharmaceutical company in the world, compared to our business with drinks and food I still wouldn''t be a pharmaceutical company".
Schneider oversaw a wave of acquisitions in your last job, at Fresenius, which encouraged among analysts the speculation that he would do the same thing in Nestlé. Yesterday, however, he said the time is not good for large acquisitions, although smaller businesses are possible. "I think the prices are too high," he added.