Third Quarter Shows the Good and the Bad of Nestle

The good news from

Third-quarter organic growth was 2.6%, exactly in line with Unilever over the same period. Only the AOA segment reported growth close to our medium-term estimates, with 5.3% organic growth, driven by 3.6% volume growth. This is particularly impressive given the disruption from the Goods and Services Tax introduced in India this year, which weighed on pricing, and suggests that Maggi is continuing to regain share. This tailwind is likely to slow from the fourth quarter, however, as the company cycles the return of Maggi to the shelf in India. Other notable strong performers were the coffee and Nespresso franchises, both of which achieved mid-single-digit growth.

Pricing, however, remains weak: 1.0% in Zone Americas, with flat pricing in North America; 0.5% in Europe, the Middle East, and North Africa; 0.1% in Nestle Waters; and 0.6% in nutrition. We estimate that the normalisation of global inflationary pressures would add around a percentage point to Nestle's organic growth, but continued anaemic price/mix points to weak pricing power within most of the portfolio.

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