Nestlé Reports Decline In Profit Amid Slower Growth, Predicts Similar Outcome In 2016

Swiss food giant Nestlé SA announced Thursday that its net profit reduced by over a third in 2015 and estimated a similar growth for 2016 as well. The latest estimate would likely increase pressure on Chief Executive Officer Paul Bulcke — who is possibly set to move to become the company’s chairman next year — to find new areas of growth.

The company is struggling with slower growth and changing preferences among consumers in emerging markets. Nestlé also said that it was facing issues to increase the prices of its products due to a difficult economic environment, Reuters reported Thursday. The report added that Nestlé has been slow to change according to consumer demands in China, while in India, its sales were affected by the recall of its popular Maggi noodles.

This marks the third consecutive year the Kit Kat maker has fallen short of its long-term target of 5-6 percent growth. The company missed forecast with a 4.2 percent rise in underlying sales, which exclude currency moves, acquisitions and divestments.

“We anticipate that our trading environment in 2016 will be similar to previous years with even softer pricing,” the company said in a statement. “As such we expect to deliver organic growth in line with 2015, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.”

Nestlé, whose sales stood at 9.1 billion Swiss francs ($9.2 billion), is currently revamping some of its recipes in China. While sales moved upwards toward the end of the year in China, the sales in India saw the first quarterly loss in 15 years, Bloomberg reported.

Bulcke reportedly wants to expand the company by increasing acquisition in the skin health and medical nutrition category in order to reduce its reliance on packaged-food industry.

Speaking to analysts, Bulcke said, according to Bloomberg, that the maker of Nespresso coffee and Gerber baby meals will not “close the book” on its long-term goals because they should not be determined by “short-term conditions.” He added: “Our trading environment in 2016 will be similar to previous years with even softer pricing.”

In July, the company acquired Merrick Pet Care Inc., a maker of organic dog and cat food. The company is also reportedly buying out minority shareholders of Osem Investments Ltd., the largest publicly traded food maker in Israel, for nearly 3.3 billion shekels ($845 million).