Group revenues have been declining slowly but comparatively steadily since 2010 (when the company adopted new accounting policies which make earlier comparisons difficult). That year, revenues were SFr 93.0bn (€67.4bn or $89.4bn), up 2% at reported rates. However the group had for several years prided itself of maintaining organic growth rates excluding currencies and M&A activity of at least 5% to 6%. In 2011, the divestment of Alcon and exchange rate fluctuations caused reported revenues to slide to SFr 83.6bn, but comparable organic growth was still strong at 7.5%. Since then, though, organic growth has steadily declined, to just under 6% in 2012, and then under the key 5% target in 2013.
The slowing market combined with unflattering exchange rates caused revenues to slip back in 2014 to SFr 91.6bn (€75.4bn or $100.0bn). Organic growth missed target for the second consecutive year at 4.5%. However net reported profits soared by 43% to SFr 14.5bn (€12.3bn or $16.2bn) as a result of a big gain on the sale of its L'Oreal shares and a revaluation of Galderma. Excluding exceptional items such as this, pretax profits slipped 17%, partly as a result of a large impairment charge.
Slowing growth and unflattering rates continued to affect performance in 2015. The group delivered organic growth of 4.2%, but that was below the "about 4.5%" it had forecast in October. Instead 2015 was the third successive year that the group fell short of its stated annual target of 5%-6%. Just under half of 2015's growth came from price increases, and the rest from higher sales volumes. Revenues came in at SFr 88.79bn (€83bn or $92.3bn). Without the previous year's gain from asset sales, attributable net profit plunged by more than a third to SFr 9.07bn (€8.5bn or $9.4bn). Excluding taxes and special items, operating profit was up 14% year on year.
There was another slowdown in 2016, with organic growth falling to 3.2%, the slowest rate for 20 years. Reported revenues were SFr 89.47bn (€82.1bn), while net profit fell by another 6% to SFr 8.88bn as a result of a higher tax charge and lower income from joint ventures. Profit before tax and joint ventures was up 6%.
Growth dipped to a new low in 2017. Reported revenues of SFr 89.79bn (€80.9bn) represented organic growth of just 2.4%. Net profit slumped by 15% to SFr 7.54bn (€6.8bn), the worst result since 2004, as a result of a range of adjustments including SFr 3.5bn of impairments against goodwill and other assets. The slump would have been even worse had it not been for a lower tax charge. Pretax profits were down almost 25% year-on-year.
The group's single biggest market overall is the US, contributing almost 30% of group revenues in 2017 (SFr 26.68bn or $27.1bn). It was followed by Greater China, where sales more than doubled in 2012, but have remained more or less flat in recent years. In 2017, China contributed 7% of group revenues, or SFr 6.58bn ($6.7bn). Other major markets are France (SFr 4.48bn or €4.1bn in 2016), Brazil (SFr 4.12bn or $4.2bn in 2016), Germany (SFr 2.87bn or €2.6bn in 2016), the Philippines SFr 2.74bn or $2.8bn), the UK (SFr 2.73bn or £2.05bn in 2016), and Mexico (SFr 2.60bn or $2.6bn in 2016). All other countries were under SFr 2bn.
Paul Bulcke replaced Peter Brabeck-Letmathe as CEO of Nestlé in 2008. Brabeck became chairman until his retirement at the end of 2016, after 50 years with the group. He was appointed instead as chairman emeritus; Bulcke became chairman and was replaced as CEO by Mark Schneider, previously head of medical products group Fresenius. Luis Cantarell - previously EVP, Europe, Middle East & North Africa - also retired, to be replaced by Marco Settembri. The latter's role as EVP and chairman & CEO, Nestlé Waters, passed to Maurizio Patarnello.
Other senior officers include Francois-Xavier Roger (EVP & CFO), Stefan Palzer (chief technology officer), Chris Johnson (EVP, Nestlé Business Excellence), Laurent Freixe (EVP, Americas), Wan Ling Martello (EVP, Asia, Oceania & Africa), Greg Behar (CEO, Nestlé Health Science) and Magdi Batato (EVP, operations). Patrice Bula is Nestlé's most senior marketer, with the title of EVP, strategic business units, marketing & sales, and also Nespresso.
Other top centralised marketers based out of Vevey include Tom Buday (head of global marketing & consumer communications), Pete Blackshaw (global head of digital marketing & social media), Nigel Conway (global head of media communications) and Pratiman Kumar (global marketing lead, strategic business units).
The Nestlé empire began with the invention of the first powdered infant formula by Swiss chemist Henri Nestlé. A process for producing dried (or "condensed") milk had been perfected in the 1850s by The Borden Milk Company of the United States. A similar process was introduced to Europe by expatriate American brothers Charles and George Page, who established their own business in Switzerland in 1866 under the name of the Anglo-Swiss Condensed Milk Company, to manufacture powdered milk mainly for the British market. A German-born scientist, Henri Nestlé, had also moved to Switzerland to experiment with the condensation process. Rather than merely preserve the shelf life of milk, his aim was to create a more nutritious food which might help reduce the high level of infant mortality in Europe caused by malnourished mothers who were unable to breast-feed. The result was a combination of powdered milk, baked cereals and sugar which he named Farine Lactée Nestlé. Introduced in 1867, it was an immediate success throughout Europe. The success of Nestlé's infant formula encouraged the Page brothers to develop a rival baby food, to which Nestlé responded with its own condensed milk powder. Nestlé himself, by then aged in his 60s, had neither the stamina nor the financial resources to maintain the business, and he quit the business in 1874, selling out to Swiss entrepreneur Jules Monnerat for SFr 1m. The two companies competed fiercely until calling a truce in 1905 and merging, initially as the Nestlé & Anglo-Swiss Condensed Milk Company.
In the mean time, another Swiss, Daniel Peter, had been experimenting with a process for making chocolate more palatable by adding milk to reduce its bitterness. Nestlé lent its assistance and expertise to the project, allowing Peter to develop the world's first milk chocolate in 1875. He established the Swiss General Chocolate to market these products under the Peter brandname, with Nestlé as a minority shareholder. The same formula was used by Nestlé to market its own branded chocolate.
Nestlé expanded rapidly during the early years of the century, establishing itself in Australia and Asia. While the First World War brought severe disruption to distribution throughout Europe, it also generated huge demand for dairy products, and Nestlé acquired several factories in the United States to fulfil lucrative government contracts. During the space of just four years, the company's production of condensed milk and chocolate doubled. But while business had boomed during the war, peace almost brought about a collapse as government contracts ended and consumers switched back to fresh milk. In 1921, as a result of the rising price of milk and other raw materials, Nestlé recorded its first loss, and the recession which followed almost killed the company. However, new chairman Louis Dapples launched a sweeping restructuring of the company, selling off unproductive factories, and consolidating the company's position in milk chocolate by taking full control of Daniel Peter's company, now Peter Cailler Kohler, following the absorption of another Swiss manufacturer a few years earlier.
Perhaps the most significant step in the development of Nestlé came in 1930 when the company was approached by the Brazilian Coffee Institute to find a way of preserving the country's huge excess production of coffee beans. The company began experimenting with similar techniques to those used for its powdered milk products. Eight years of research led to a method of drying the bean to make a long-life soluble product. Nescafe was born. World War II had an enormous impact on Nestlé. Isolated in neutral Switzerland, the group moved its senior management team to the United States. By 1945, sales had more than doubled to $225m, and the group had become a worldwide coffee concern, with factories all over the globe. Consumer demand for coffee continued to soar, and sales of instant coffee tripled during the 1950s, then quadrupled during the 1960s and early 1970s. By the end of that decade, almost half of Nestlé's profits were generated by coffee.
To balance the inexorable rise of coffee, Nestlé worked hard to develop the other sides of its business, and launched a series of acquisitions. In 1947, the group merged with Alimentana, maker of Maggi soups and seasonings, to form Nestlé Alimentana. This was followed by the acquisition of Crosse & Blackwell preserves and France Glaces ice cream in 1960, Findus Frozen Foods (1962), Libby's fruit juices (1963), Vittel mineral water (1969), and Stouffer's frozen foods (1973). It even flirted for a while with wine-making, acquiring the Beringer vineyards in the US in 1971. In 1974, Nestlé took its first steps outside the food and beverage industry, buying what was then a 49% stake in the holding company for L'Oreal cosmetics. Pharmaceutical developer Alcon Laboratories was added in 1977. By the end of that decade, food was back on the shopping list. First Chambourcy in 1979, then Carnation in 1985 for $3bn in what was then one of the world's biggest food industry takeovers. British chocolate maker Rowntree Mackintosh and Italian food company Buitoni were added in 1988.
In 1992, Nestlé launched a hostile takeover of bottled water manufacturer Perrier, following the latter's poor handling of a contamination scare. The same year it bought UK business Clarke Foods, including ice cream brand Lyons Maid, for around £30m. Petfood company Alpo joined the group in 1994, merging with the Friskies business acquired as part of Carnation. In 1998 Nestlé acquired Spillers for $1.2bn, making it Europe's #2 petfood company after Mars. At the same time the group began pulling out of raw cocoa processing, closing or selling a string of factories around the globe. Other sales included subsidiary US coffee brands Chase & Sanborn, Hills Brothers and MJB (to Sara Lee for around $280m); and various manufacturing businesses. Among acquisitions, the group acquired a majority stake in China's #1 bouillon business, Totole, in 1999; US energy and nutrition manufacturer PowerBar in early 2000, followed by the capture of US petfood business Ralston Purina for $10.3bn.
In 2001, the group agreed an alliance with Fonterra, New Zealand's largest company and the world's foremost exporter of dairy products under the New Zealand Milk and Anchor brands, to develop joint ventures in Latin America to market new milk-based food and beverage products. This was later formalised early in 2002 as Dairy Partners America (DPA). Nestlé also strengthened its position in China, agreeing a joint venture (60% controlled by Nestlé) with the shareholders of local food company Haoji to take over the latter's business. The venture, Sichuan Haoji, is China's biggest #2 manufacturer of chicken stock and pastes. Late in the year, the group invested around $61m to support the creation of a new Swiss national airline to replace collapsed operator Swissair, and also agreed to acquire Schoeller Group, the ice cream and frozen food manufacturer whose brands include Moevenpick ice cream.
In 2002 the group gave its UK portfolio an overhaul, selling its Crosse & Blackwell portfolio of ambient sweet and savoury spreads to Premier Foods. At the same time Nestlé paid £145m to acquire the Ski and Munch Bunch chilled dairy brands from Northern Foods, the UK's #2 yogurt brands behind Muller. Also that year the group merged its existing ice cream operations in the US with the region's biggest player, Dreyer's. The group also announced formation of Laboratoires Inneov, a joint venture with L'Oreal, to develop nutritional supplements designed to to improve the quality of skin, hair and nails.
In 2005, Nestlé's board appointed group CEO Peter Brabeck-Letmathe with the additional role of chairman, following the retirement of Rainer Gut. That move was greeted by fierce opposition from several large investors who supported a split role for the sake of better corporate governance. Brabeck threatened to resign from the group altogether if the dual appointment was blocked. In the end the motion was passed by a majority, but only after more than a third of shareholders voted against the combined role. Brabeck-Letmathe finally stepped down as CEO in April 2008, and was replaced by Paul Bulcke, previously EVP, Nestlé Americas. Paul Polman, formerly CFO and at one point widely considered the favourite to succeed Brabeck, replaced Bulcke as head of Nestlé Americas, but resigned from the company a few months later to become CEO of Unilever. A further shakeup of senior managers followed that announcement. Lars Olofsson, previously EVP, strategic business units & marketing, left the group in November 2008 to become CEO of Carrefour.
Last full revision 23rd February 2018
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