Nestle on Track for Another Subpar Year

First-quarter organic growth of 2.8% was in line with our forecast and mercifully above the 1.9% growth of fourth-quarter 2018. It remains, however, well below the roughly 4% being achieved by many other large-cap consumer staples multinationals, primarily reflecting Nestle's soft price/mix, which again deteriorated sequentially in the quarter, to just 0.2%. Volume growth of 2.6% was an improvement over the fourth quarter, but was supported by the absence of pricing. Nestle's sales data looks particularly weak when contrasted against the performance of close competitor Danone, which achieved 4.9% like-for-like growth and posted greatly superior results in the categories in which it goes head-to-head with Nestle: bottled water and infant formula.

Geographically, sales contained few surprises and were consistent with both our forecasts and commentary from other consumer staples multinationals that have reported so far this reporting season. Zone AOA, which includes Asia, was strong with 4.7% organic growth, thanks to growth in emerging markets and a strong Chinese New Year selling period. On the other hand, Europe was weak with negative pricing.

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